An incentive problem of risk balancing in portfolio choices

Lu, Jin-Ray; Hwang, Chih-Chiang; Liu, Min-Luan; Lin, Chien-Yi

doi:10.1016/j.qref.2016.02.006

Cited by 2 publications

(1 citation statement)

References 28 publications

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“…As per Merton (1987) and Falkenstein (1996), a stock’s visibility attracts additional investors. Furthermore, GR may elicit portfolio rebalancing decisions, for instance when traders divest of lower-growth entities (Lu et al , 2016). The GR of firms are likely to affect share prices, since the latter are responsive to the firms’ profitability and expected future growth.…”

Section: Literature Reviewmentioning

confidence: 99%

The determinants of securities trading activity: evidence from four European equity markets

Camilleri

Galea²

2019

JCMS

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Purpose The purpose of this paper is to obtain new empirical evidence about the connections between equity trading activity and five possible liquidity determinants: market capitalisation, dividend yield, earnings yield, company growth and the distinction between recently listed firms as opposed to more established ones. Design/methodology/approach The authors use a sample of 172 stocks from four European markets and estimate models using the entire sample data and different sub-samples to check the relative importance of the above determinants. The authors also conduct a factor analysis to re-classify the variables into a more succinct framework. Findings The evidence suggests that market capitalisation is the most important trading activity determinant, and the number of years listed ranks thereafter. Research limitations/implications The positive relation between trading activity and market capitalisation is in line with prior literature, while the findings relating to the other determinants offer further empirical evidence which is a worthy addition in view of the contradictory results in prior research. Practical implications This study is of relevance to practitioners who would like to understand the cross-sectional variation in stock liquidity at a more detailed level. Originality/value The originality of the paper rests on two important grounds: the authors focus on trading turnover rather than on other liquidity proxies, since the former is accepted as an important determinant of the liquidity-generation process, and the authors adopt a rigorous approach towards checking the robustness of the results by considering various sub-sample configurations.

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Section: Literature Reviewmentioning

confidence: 99%