This paper dissects the lottery-like anomaly in Chinese A-share stocks by decomposing total stock returns into overnight and intraday returns. Our findings indicate that the negative overnight returns are concentrated among lottery-like stocks, and the lottery-like anomaly is mainly driven by the overnight returns component. Considering the unique Chinese institutional features, our mechanism analysis reveals that the overnight returns induced lottery-like anomaly is more pronounced in stocks with high retail investors' gambling preference and high limits of arbitrage. Overall, our results suggest that investors optimism and trading constraints have a substantial impact on market efficiency in China.

This paper examines how globalization process shapes the corporate ESG efforts in emerging markets. Using a staggered difference-in-difference model based on the gradual inclusion of China's A-shares in the MSCI index, we find that public companies improved their ESG performance and disclosure quality after being included. The results are robust to propensity score matched sample. Notably, the impact on ESG disclosure was significantly greater than on ESG performance, and the effect is more pronounced for non-SOEs and firms with weak governance. The inclusion also leads to significant increasesin foreign holdings, the proportion of women directors, and analyst attention, which have promoting effects on corporate ESG performance and disclosure ratings. This study sheds light on the macro-level determinants of corporate ESG engagement.

Firms in China increase green innovation following a mandate that requires them to regularly disclose their corporate social responsibility (CSR) activities. Further analyses show that the CSR disclosure mandate leads to higher media coverage of disclosing firms' environmental issues, and the increase mainly comes from negative environmental news. By contrast, voluntary CSR disclosure does not affect corporate green innovation, and it increases positive but not negative environmental media coverage. These findings suggest that (1) it is the mandatory feature of the mandate, not the act of disclosure, that matters most for the positive effect on corporate green innovation; and (2) the negative media coverage induced by mandatory CSR disclosure plays a disciplinary role and promotes green innovation, while the positive media coverage induced by voluntary CSR disclosure does not.

In this paper, we identify cross-sectional anomalies in excess returns of industrial bonds at the issuer and secondary market levels, and find that liquidity, risk, and historical return variables can generate cross-sectional excess returns that cannot be explained by traditional bond factors. We also introduce a risk premium factor that is economically and statistically significant in industrial bonds based on the risk characteristics prevalent in credit bonds and that cannot be explained by long-standing bond market factors. We show that the newly identified risk factor outperforms the other anomalies considered in this paper in explaining the cross-sectional returns of industrial bonds.

The China-U.S. trade frictions and COVID-19 pandemic have caused unprecedentedly high economic policy uncertainty since 2017. To resist this high uncertainty, investors may prefer large stocks over small stocks, thereby damaging the size effect. To test this inference, we apply data from China to show that the size effect becomes insignificant after 2017. However, a significant size effect re-emerges among stocks with low valuations or low volatility, and this is positively associated with the increment of the economic policy uncertainty index. We also find that when uncertainty increases, institutional investors increase their holdings in small stocks before 2017, but hold more large stocks after 2017. Our findings consistently suggest that high policy uncertainty may change investors' preferences for firm size and cause the disappearance of the size effect, and only among stocks with low risk, size effects may show up due to low-risk small firms' similar function in resisting market uncertainty as large firms. Other mechanisms, such as the quality premium, unexpected profitability shock, shell value, or M&A option value, are not applicable in explaining the findings in China. Our study contributes to proposing a new mechanism for the time-variability of the size effect.

Against the backdrop of the United Kingdom's withdrawal from the European Union (BREXIT), this study examines predictability in the stock markets of sixteen European countries, the United States, and the BRICS (Brazil, China, India, Russia, and South Africa) by analyzing how their returns predict the returns of sixteen commodities at different quantile levels. The study builds upon existing literature on predictability and extends it by investigating the impact of the BREXIT crisis on these markets. The findings suggest that investors can hedge their portfolios with various commodities during times of the BREXIT crisis, but caution is advised, and the trend of both equities and commodities should be closely monitored before making investment decisions.

The objective of this study is to create optimal two-asset portfolios consisting of stocks from Western Europe, the United States, and the BRICS (Brazil, China, India, Russia, and South Africa), as well as sixteen commodity types during the BREXIT period. We utilized dynamic variances and covariances from the GARCH model to derive weights for the two-asset portfolios, with each portfolio consisting of one equity factor and one commodity factor. Subsequently, hedge ratios were calculated for these various assets. Our findings indicate that portfolios consisting of European stocks do not require the inclusion of commodities, whereas the other equities do.

This paper examines the effects of economic shocks originating from China’s Five-Year Plans on firms’ shareholders and stakeholders in the U.S. Using establishment-level data, we show that the shocks were not preceded by low production or employment, nor were they anticipated by the U.S. stock market, but were followed by shrinkage of targeted sectors. Well-financed firms with adaptable sectorial and territorial layouts came out mostly unscathed due to within-firm adjustments, such as shifting production to upstream or downstream industries that benefited from the boost in the focal industries in China, or offshoring to encouraged industries in China. These adjustments extended limited benefits to employees and communities, measured by employment and opioid usage.

In the information age, major negative events can spread quickly and affect investor perceptions and decisions. Selecting major violent crime events in China, we investigate the role of corporate social responsibility (CSR) in mitigating regional negative public sentiment. We find that the firms with better CSR performance have higher stock returns around the event day. We also find that investors react more positively for firms engaging in technical CSR activities (those targeting a firm’s primary stakeholders) than institutional CSR activities (those serving the public). Moreover, the effect is more pronounced for firms with better internal control quality and higher information transparency. Overall, this study documents a positive role of CSR in securing firm value in the face of negative public sentiment.

The equity premium puzzle, properly termed the American Equity Premium Puzzle, is one of the most significant empirical anomalies in finance, as it pertains to the observation that the expected return on equities has been consistently higher than that of bonds for many years, and that this premium is excessive. This paper presents one answer to the Equity Premium Puzzle, viz., the Disruptive Dependency Theory. The Disruptive Dependency Theory states that the world can be viewed in terms of “core” and “periphery” nations. Thus, there is a "core" set of nations in the world that are strong and a "periphery" that is relatively weak. This has been the state of the world since the end of the Second World War. The nations in the "core" are the strong nations. This includes the United States, China, Russia, France and the United Kingdom. What constitutes the "periphery" is a bit nebulous, but certainly the weakest nations such as island nations (Vanuatu, Togo, Jamaica, Antigua & Barbuda) belong the periphery. The nations in the core use the following to exert their influence on the nations in the periphery: (a) political strategies; (b) economic strategies; (c) social and cultural strategies; (d) technological strategies. Disruptive innovation has emerged as one of the chief strategies. With the rise of disruptive innovation, they are able to "disrupt" existing business in a very large number of periphery nations, thereby a very small number of individuals are becoming super-rich billionaires while the rest of the world remains still quite poor. According to this theory, it is the power differential of nations that historically resulted in the equity premium for stocks being excessively high. This paper explores the implications of the Disruptive Dependency Theory and its potential contribution to understanding the Equity Premium Puzzle.