Asset Management Review 2023 KCI Impact Factor : 0.55
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pISSN : 2288-6672 / eISSN : 2713-6248
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Risk premium evaluation for stock crash risk
- Asset Management Review
- Abbr : AMR
- 2022, 10(1), pp.43~70
- DOI : 10.23007/amr.2022.10.1.43
- Publisher : Institute of Management Research, SungKyunKwan University
- Research Area : Social Science > Business Management > Finance
- Received : April 9, 2022
- Accepted : June 23, 2022
- Published : June 30, 2022
KIM WOO HYUN 1, Youngtae Byun 2
1경북대학교
2경성대학교
Accredited
ABSTRACT
A stock price crash occurs suddenly when negative information accumulated inside a company flows into the market at once. If investors can recognize the stock crash risk in advance, they will demand a high risk premium for stocks with a high stock crash risk. Most of the previous studies focused on finding the determinants of stock crash risk, so it was difficult to find the effect of stock crash risk on the wealth of shareholders. Therefore, this study aims to examine how stock crash risk affects the wealth of shareholders by examining the effect of stock crash risk on stock returns. To verify this, CRHML, a factor mimicking portfolio that well reflects stock crash risk, was constructed and the existence of a risk premium was verified. As a result of the empirical test of this study, it was confirmed that stock crash risk is a risk that is out of the trade-off between risk and return, and that appropriate compensation is not given for taking the stock crash risk. This study is different from previous studies in that it deals with ex post investment performance related to stock crash risk and provides overall information on firm value and investor performance using variables expressed as returns.
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