The nexus among maxing out effect and idiosyncratic volatility premium puzzle in China’s A Share Market under the background of eco-innovation and sustainability

Abstract

The paper investigates whether eco-innovation, sustainability, and asset pricing effect of maximum daily return (maxing out effect), truly and steadily exists in A share market of China and the nexus among maxing out effect and idiosyncratic volatility in China’s A Share Market. Regression analyses were conducted using the data of listed companies in China’s A share market from July 1993 to May 2021. The empirical results show that the maxing out effect, eco-innovation and sustainability steadily exists in a sample country. In practice, this research help to improve asset pricing efficiency, provide high-quality materials for investor education, guide arbitrage trading activities, and improve resource allocation efficiency in the stock market.

Keywords:

• Ecco-innovation
• sustainability
• maxing out effect
• idiosyncratic volatility

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

Xiaohui Chen acknowledges the financial support from Soft Scientific Research Program of Henan Province (232400412002). Jianhua Ye acknowledges the financial support from Program for Science & Technology Innovation Talents in Universities of Henan Province (Humanities and social science project) (2021-CX-003), Key Science Research Program of Henan University (23A630016), Soft Scientific Research Program of Henan Province (232400412028) and Postgraduate Education Reform and Quality Improvement Project of Henan Province (2019SJGLX098Y).