The Skewness Of Stock Return In China

With the concept of " more rational the investment, much smarter the investor ", financial investors has become increasingly concerned about the real value of stock returns. A lot of evidence shows that stock returns are not perfectly normally distributed, can not meet the efficient market hypothesis (EMH) assumptions of financial theory, which means that there skewness is positive or negative, not equal to zero. In this paper, to study the stock return skewness in China, we try to analyze which factors will affect. Under the precondition of the short-sale constraints and heterogeneous investors, price convexity appears in the stock price reaction to the news. we use price reaction to earnings announcement to test the relationship between skewness and the price reaction. Furthermore, we post the following forecasts: 1. the skewness of stock return has a positive correlation with the current return, and has a negative correlation to lagged return. 2. skewness is directly proportional to volume, and is inversely proportional to the stock scale. Empirical part is composed of three parts: first, the price reaction to earnings announcement; second , the empirical evidence is to study the skewness in Shanghai Stock; Finally, we pay attention to one assumption--short-sale constraints, to test whether it may make the skewness more positive. We are interested in the constructive results for the current pilot implementation of margin trading in China.We find some factors appear significant effect, but the adj-R2 of the regression is too low. Reasons may include the following: 1.the sample selected in H shares and Shanghai Stock Market is too small; 2. economic factors caused by the financial crisis in 2008 has a great impact on the skewness; 3 .there may be a better variable to explain skewness, such as the institutional ownership.