| Based on the views of behavioral corporate finance and the terminology in the gamble and the horse race,we use expected skewness to divide the return distribution of the China's listed companies into favourite and long shot,and then conduct theoretical analysis and empirical test on the CEO long-shot bias in response to the China's listed companies.And we use the conclusions we have obtained to construct an integrated stock selection strategy that combines fundamental stock picking and market action stock selection to correct the Fama-French three-factor stock selection model based on the rational economic man hypothesis.The research has indicated five imperative conclusions as follows.(1)Viewing the situation as a whole,the CEOs are in some way similar to the gamblers in the gambling house,and the CEO long-shot bias is generally existing in China's listed companies.(2)In the companies with small asset size,the CEO long-shot bias in the investment decisions tends to be more intense.(3)Long-shot bias may cause the deficiency of effective supply in the whole society,and our country should conduct the supply-side structural reform unalterably.(4)From the view of local economic developing level,the companies in the developing area prefer the long shot most,and the developed area and the poor area are not sensitive to the long shot.(5)The unexplained difference in the industry-level stock returns in the Fama-French five-factor model can be explained by the expected skewness factor.Industries with positive skewness are expected to obtain higher profits than those industries with negative skewness.(6)The stock selection model after adding the expected skewness factor can obtain a higher return on income than the three-factor model.The expected skewness can be used as a leading indicator to judge market sentiment to provide reference for t he relevant practitioners' stock selection work. |
