2016, Vol.4, No.1

Asset Management Review 2023 KCI Impact Factor : 0.55

pISSN : 2288-6672 / eISSN : 2713-6248
https://journal.kci.go.kr/capm

We investigate if low volatility anomaly is observed mainly in a certain market condition. We expect that low volatility anomaly can be explained by investor’s judgement bias depending on the market condition. To examine how low volatility anomaly depends on the market condition, we use coincident composite index, reference turning date and sentiment index to divide the market condition into boom and recession. Our analysis results show that high-risk stock return has been lower than low-risk stock return since the early 2000s, especially during the recession. This results suggest that the investor’s judgement bias is observed markedly during the recession since high-risk stock is overvalued in the boom and then overvalued high-risk stock return declines in the recession. This study contributes to the literature by showing the association between low volatility anomaly and the market condition. We provide empirical evidence that the investor’s judgement is affected by the market condition. Our findings suggest the strategy of investing low-risk stock portfolio depending on the market condition to raise returns and diminish risk simultaneously.

This paper examine the profitability of the day trading strategy after the event of price limit enlargment on the 15th of May, 2015. Using the complete trading records from Jan 2015 to Dec 2015, we find that the number of day trading and the number of day traders (including consistent day trader) are increased after the regulation change. The lower profit relates to the transaction cost and frequent day trading. While the change of price limit enlarge volatility, the frequent day trading decreased trading profit due to the trading cost. This paper contributes to the understanding of day trading strategy in terms of enlargement of price limt 30% from 15%.

We find that characteristics of stocks owned by institutional investors are changed after the 2007-2008 financial crisis, by analyzing institutional investors that have been reported on the filings of SEC’s Form 13F from 2005 to 2011. We find that before the crisis institutional investors prefer stocks with low past volatility. However, we find no such patterns or even opposite patterns after the crisis. Consistent with previous literature, we confirm they consistently have a strong preference for large, liquid, and under-valued stocks before and after the crisis. However, we find that this preference is statistically weak in the middle of financial crisis.