Ambiguity—Risk—Return: Evidence from the Stock Market in China

Yingxiu Zhao; Baojuan Shi; Fang Song; Lin Zhou

doi:doi:10.11648/j.ajam.20221004.11

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Ambiguity—Risk—Return: Evidence from the Stock Market in China

Yingxiu Zhao, Baojuan Shi, Fang Song, Lin Zhou

Published in American Journal of Applied Mathematics (Volume 10, Issue 4)

Received: 25 May 2022 Accepted: 27 June 2022 Published: 5 July 2022

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Abstract

In the past decades, ambiguity in the stock market has been widely studied theoretically and experimentally. Most existing studies focus on foreign financial markets, such as American stock market. However, there are essential differences between Chinese stock market and others stock market, such as its participants and trading mechanisms. Therefore, it is necessary to study the relation of ambiguity, risk and expected return in China's stock market. This study analyzes CSI 300 index data for January 2006 to February 2020 to investigate the relationships between ambiguity, risk, and expected returns in China’s stock market. We apply empirical methods to measure the degree of ambiguity and assess attitudes toward ambiguity from the China's market data, the results indicate that: (1) the degree of ambiguity increases with the expected return; (2) when risk and ambiguity are introduced simultaneously, the expected return of China's stock market is significant negative; and (3) in addition, we also prove that the investors’ level of aversion to or preference for ambiguity, which depends on the expected probability of favorable returns. In sum, our results not only clarify ambiguity and risk regarding expected returns but also provide the theoretical and practical implications for the problem of asset prices in China's stock market.

Published in	American Journal of Applied Mathematics (Volume 10, Issue 4)
DOI	10.11648/j.ajam.20221004.11
Page(s)	118-124
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Ambiguity, Ambiguity Version, Return, Risk

References

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APA Style

Yingxiu Zhao, Baojuan Shi, Fang Song, Lin Zhou. (2022). Ambiguity—Risk—Return: Evidence from the Stock Market in China. American Journal of Applied Mathematics, 10(4), 118-124. https://doi.org/10.11648/j.ajam.20221004.11

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ACS Style

Yingxiu Zhao; Baojuan Shi; Fang Song; Lin Zhou. Ambiguity—Risk—Return: Evidence from the Stock Market in China. Am. J. Appl. Math. 2022, 10(4), 118-124. doi: 10.11648/j.ajam.20221004.11

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AMA Style

Yingxiu Zhao, Baojuan Shi, Fang Song, Lin Zhou. Ambiguity—Risk—Return: Evidence from the Stock Market in China. Am J Appl Math. 2022;10(4):118-124. doi: 10.11648/j.ajam.20221004.11

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@article{10.11648/j.ajam.20221004.11,
  author = {Yingxiu Zhao and Baojuan Shi and Fang Song and Lin Zhou},
  title = {Ambiguity—Risk—Return: Evidence from the Stock Market in China},
  journal = {American Journal of Applied Mathematics},
  volume = {10},
  number = {4},
  pages = {118-124},
  doi = {10.11648/j.ajam.20221004.11},
  url = {https://doi.org/10.11648/j.ajam.20221004.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ajam.20221004.11},
  abstract = {In the past decades, ambiguity in the stock market has been widely studied theoretically and experimentally. Most existing studies focus on foreign financial markets, such as American stock market. However, there are essential differences between Chinese stock market and others stock market, such as its participants and trading mechanisms. Therefore, it is necessary to study the relation of ambiguity, risk and expected return in China's stock market. This study analyzes CSI 300 index data for January 2006 to February 2020 to investigate the relationships between ambiguity, risk, and expected returns in China’s stock market. We apply empirical methods to measure the degree of ambiguity and assess attitudes toward ambiguity from the China's market data, the results indicate that: (1) the degree of ambiguity increases with the expected return; (2) when risk and ambiguity are introduced simultaneously, the expected return of China's stock market is significant negative; and (3) in addition, we also prove that the investors’ level of aversion to or preference for ambiguity, which depends on the expected probability of favorable returns. In sum, our results not only clarify ambiguity and risk regarding expected returns but also provide the theoretical and practical implications for the problem of asset prices in China's stock market.},
 year = {2022}
}

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TY  - JOUR
T1  - Ambiguity—Risk—Return: Evidence from the Stock Market in China
AU  - Yingxiu Zhao
AU  - Baojuan Shi
AU  - Fang Song
AU  - Lin Zhou
Y1  - 2022/07/05
PY  - 2022
N1  - https://doi.org/10.11648/j.ajam.20221004.11
DO  - 10.11648/j.ajam.20221004.11
T2  - American Journal of Applied Mathematics
JF  - American Journal of Applied Mathematics
JO  - American Journal of Applied Mathematics
SP  - 118
EP  - 124
PB  - Science Publishing Group
SN  - 2330-006X
UR  - https://doi.org/10.11648/j.ajam.20221004.11
AB  - In the past decades, ambiguity in the stock market has been widely studied theoretically and experimentally. Most existing studies focus on foreign financial markets, such as American stock market. However, there are essential differences between Chinese stock market and others stock market, such as its participants and trading mechanisms. Therefore, it is necessary to study the relation of ambiguity, risk and expected return in China's stock market. This study analyzes CSI 300 index data for January 2006 to February 2020 to investigate the relationships between ambiguity, risk, and expected returns in China’s stock market. We apply empirical methods to measure the degree of ambiguity and assess attitudes toward ambiguity from the China's market data, the results indicate that: (1) the degree of ambiguity increases with the expected return; (2) when risk and ambiguity are introduced simultaneously, the expected return of China's stock market is significant negative; and (3) in addition, we also prove that the investors’ level of aversion to or preference for ambiguity, which depends on the expected probability of favorable returns. In sum, our results not only clarify ambiguity and risk regarding expected returns but also provide the theoretical and practical implications for the problem of asset prices in China's stock market.
VL  - 10
IS  - 4
ER  -

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Author Information

Yingxiu Zhao

School of Economics, North China University of Science and Technology, Tangshan, China
Baojuan Shi

School of Economics, North China University of Science and Technology, Tangshan, China
Fang Song

School of Economics and Management, Qinghai Minzu University, Xining, China
Lin Zhou

School of Economics and Management, Qinghai Minzu University, Xining, China

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Plain Text BibTeX RIS

APA Style

Yingxiu Zhao, Baojuan Shi, Fang Song, Lin Zhou. (2022). Ambiguity—Risk—Return: Evidence from the Stock Market in China. American Journal of Applied Mathematics, 10(4), 118-124. https://doi.org/10.11648/j.ajam.20221004.11

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ACS Style

Yingxiu Zhao; Baojuan Shi; Fang Song; Lin Zhou. Ambiguity—Risk—Return: Evidence from the Stock Market in China. Am. J. Appl. Math. 2022, 10(4), 118-124. doi: 10.11648/j.ajam.20221004.11

Copy | Download

AMA Style

Yingxiu Zhao, Baojuan Shi, Fang Song, Lin Zhou. Ambiguity—Risk—Return: Evidence from the Stock Market in China. Am J Appl Math. 2022;10(4):118-124. doi: 10.11648/j.ajam.20221004.11

Copy | Download

@article{10.11648/j.ajam.20221004.11,
  author = {Yingxiu Zhao and Baojuan Shi and Fang Song and Lin Zhou},
  title = {Ambiguity—Risk—Return: Evidence from the Stock Market in China},
  journal = {American Journal of Applied Mathematics},
  volume = {10},
  number = {4},
  pages = {118-124},
  doi = {10.11648/j.ajam.20221004.11},
  url = {https://doi.org/10.11648/j.ajam.20221004.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ajam.20221004.11},
  abstract = {In the past decades, ambiguity in the stock market has been widely studied theoretically and experimentally. Most existing studies focus on foreign financial markets, such as American stock market. However, there are essential differences between Chinese stock market and others stock market, such as its participants and trading mechanisms. Therefore, it is necessary to study the relation of ambiguity, risk and expected return in China's stock market. This study analyzes CSI 300 index data for January 2006 to February 2020 to investigate the relationships between ambiguity, risk, and expected returns in China’s stock market. We apply empirical methods to measure the degree of ambiguity and assess attitudes toward ambiguity from the China's market data, the results indicate that: (1) the degree of ambiguity increases with the expected return; (2) when risk and ambiguity are introduced simultaneously, the expected return of China's stock market is significant negative; and (3) in addition, we also prove that the investors’ level of aversion to or preference for ambiguity, which depends on the expected probability of favorable returns. In sum, our results not only clarify ambiguity and risk regarding expected returns but also provide the theoretical and practical implications for the problem of asset prices in China's stock market.},
 year = {2022}
}

Copy | Download

TY  - JOUR
T1  - Ambiguity—Risk—Return: Evidence from the Stock Market in China
AU  - Yingxiu Zhao
AU  - Baojuan Shi
AU  - Fang Song
AU  - Lin Zhou
Y1  - 2022/07/05
PY  - 2022
N1  - https://doi.org/10.11648/j.ajam.20221004.11
DO  - 10.11648/j.ajam.20221004.11
T2  - American Journal of Applied Mathematics
JF  - American Journal of Applied Mathematics
JO  - American Journal of Applied Mathematics
SP  - 118
EP  - 124
PB  - Science Publishing Group
SN  - 2330-006X
UR  - https://doi.org/10.11648/j.ajam.20221004.11
AB  - In the past decades, ambiguity in the stock market has been widely studied theoretically and experimentally. Most existing studies focus on foreign financial markets, such as American stock market. However, there are essential differences between Chinese stock market and others stock market, such as its participants and trading mechanisms. Therefore, it is necessary to study the relation of ambiguity, risk and expected return in China's stock market. This study analyzes CSI 300 index data for January 2006 to February 2020 to investigate the relationships between ambiguity, risk, and expected returns in China’s stock market. We apply empirical methods to measure the degree of ambiguity and assess attitudes toward ambiguity from the China's market data, the results indicate that: (1) the degree of ambiguity increases with the expected return; (2) when risk and ambiguity are introduced simultaneously, the expected return of China's stock market is significant negative; and (3) in addition, we also prove that the investors’ level of aversion to or preference for ambiguity, which depends on the expected probability of favorable returns. In sum, our results not only clarify ambiguity and risk regarding expected returns but also provide the theoretical and practical implications for the problem of asset prices in China's stock market.
VL  - 10
IS  - 4
ER  -

Copy | Download