The 337th Wenlan Financial Forum

Abstract：

The debate over whether the idiosyncratic volatility anomaly exists in stock markets has long been unresolved. This study re-examines the anomaly by distinguishing between daily-frequency and monthly-frequency idiosyncratic volatility, aiming to address this controversy. Using A-share listed companies in China as the research sample, empirical results reveal that the debate stems from differences in sampling frequencies: the daily-frequency idiosyncratic volatility anomaly is significant, whereas the monthly-frequency anomaly is not. This divergence arises from the information decay effect in historical samples. The daily-frequency anomaly is driven by the reversal effect caused by overvaluation of high-idiosyncratic-volatility stocks, with the stock price overvaluation factor playing a critical mediating role. Heterogeneity tests show that the anomaly is more pronounced in portfolios with low institutional ownership, high retail investor participation, limited short-selling activity, and low analyst coverage. Policy-effect analyses indicate that the severe short-selling constraints in China’s capital markets, leading to an imbalance between margin trading and short selling, are the root cause of persistent stock price overvaluation and the idiosyncratic volatility anomaly. These findings reconcile the academic debate on the anomaly’s existence and deepen investors’ understanding of pricing anomalies in China’s capital markets.

Speaker Introduction：

Jinbo Huang is currently a Professor and Doctoral Supervisor at the School of Economics, Shenzhen University. He holds prestigious titles including the Pearl River Scholar of Guangdong Province, Outstanding Young Scholar of Guangdong Province, and is a recipient of Shenzhen’s Pengcheng Peacock Program. Previously, he served as a Distinguished Young Scholar at Guangdong University of Finance and Economics, where he led the development of the provincial first-class program in Financial Engineering and the provincial first-class course Financial Engineering. His research focuses on financial engineering and risk management, with a current emphasis on extracting and applying implied information from option prices in China’s markets.

Prof. Huang has published over 40 papers in leading international and domestic journals, including Journal of Economic Dynamics and Control, Journal of Banking and Finance, Journal of Empirical Finance, Management Science Journal (China), Systems Engineering Theory and Practice, Chinese Journal of Management Science, Statistical Research, and Economic Research Journal. He has led 15 research projects, including sub-projects of the Major Program of the National Social Science Fund of China, National Natural Science Foundation of China (NSFC) grants, and grants from the Ministry of Education and Guangdong Province. His accolades include the First and Second Prizes of the Outstanding Achievements in Philosophy and Social Sciences of Guangdong Province and multiple awards for outstanding financial research.

Prof. Huang serves as a peer review expert for the NSFC and the National Social Science Fund of China, an external expert at Sun Yat-sen University’s Center for Financial Engineering and Risk Management, a council member of several national academic associations, and a reviewer for multiple SSCI, CSSCI, and CSCD journals.