This study investigates the liquidity dynamics and risk premiums in China's green bond market. Unlike previous studies relying on single indicators, a comprehensive illiquidity measure incorporating both liquidity level and liquidity risk dimensions is constructed using principal component analysis. The empirical results demonstrate that illiquidity significantly increases green bond spreads, confirming the existence of a liquidity premium. Notably, the composite measure exhibits superior explanatory power for pricing efficiency compared to single-dimensional metrics. Heterogeneity analysis reveals that liquidity premiums are more pronounced in high-rated, high-coupon, and short-maturity bonds. Furthermore, this pricing impact is time-varying and has intensified over the sample period. These findings provide critical implications for policymakers to enhance market infrastructure and for investors to manage liquidity risk in emerging green financial markets.

We employ the "Two Sessions," comprising the National People’s Congress and the Chinese People’s Political Consultative Conference, as a proxy for measuring policy uncertainty. In our analysis, we utilize a regression model, the three-path mediated effect framework, and the Campbell and Shiller decomposition method to delve into the influence of policy uncertainty on asset pricing within China’s financial market. Our findings reveal an increase in stock returns during the months leading up to the "Two Sessions," evident at both the market and firm levels. Notably, the extent to which stock returns respond to policy uncertainty is contingent on various firm-specific characteristics, including ownership structure, company size, and profitability. Furthermore, our investigation confirms that investor sentiment serves as a complete mediator in the relationship between policy uncertainty and its impact on asset prices. Additionally, we identify future cash flow as the primary conduit through which policy uncertainty directly exerts its influence on asset prices.

In this study, we show that changes in profitability predict a firm's stock returns and future profitability. We construct three horizon-based profitability changes, including short-, medium-, and long-term changes. We find that the predictive information for short-term changes in profitability is not subsumed by the profitability level in the Chinese stock market. We also find that short-term profitability changes generate an asymmetrical premium across different market states. Furthermore, we find that the beta anomaly is embedded in the premium generated by a short-term change in profitability. In addition, we explore the underlying mechanisms of the profitability premium and propose a heterogeneous investor belief channel to explain the profitability premium. We find that risk-based q-theory also helps explain the profitability premium. Therefore, the profitability premium comes from a mixed source and cannot be entirely explained by a single theory.

Earnings communication conferences in China have become the main platform for direct communication between listed firms and individual investors. This study investigates whether hosting an earnings communication conference and its tone affect post-earnings-announcement drift (PEAD). We find that hosting an earnings communication conference increases PEAD. One possible explanation for our results is that investors overreact to the stock prices of firms that hold earnings communication conferences. We also conclude that the conference tone is negatively correlated with PEAD. In addition, the market reacts more strongly to the managers' tone than it does to the investor's tone.

This paper investigates the impact of multidimension liquidity, credit risk, and the interaction between liquidity and credit risk on corporate bond spreads based on a large transaction data set from July, 2006 to June, 2016, including the monthly data of 3716 bonds in China. Our main findings reveal that liquidity premiums are the main parts of corporate bond spreads. The interaction between liquidity and credit risk plays a significant role in determining corporate bond spreads. In addition, the differences between the interbank market and the exchange market have a significant impact on corporate bond spreads in normal period, and the interaction between liquidity and credit risk has an enhanced impact on corporate bond spreads during financial crisis. We also find that the interaction between liquidity and credit risk will increase with the increase of liquidity risk and credit risk and it is a time-varying dynamic process.

This study derives a liquidity and credit risk-adjusted capital asset pricing model and investigates the model using the data set in China's corporate bond market. Our research shows that the channels through which liquidity risk affects corporate bond return are individual bond liquidity risk, the interaction between individual bond liquidity risk and market liquidity risk. The channels through which credit risk affects corporate bond return are individual bond credit risk, the interaction between individual bond credit risk and market credit risk. The main channel through which the interaction between liquidity risk and credit risk affects corporate bond return is the interaction between individual bond liquidity risk and market credit risk. The model reveals the impact mechanism of individual risk and market risk on bond return and explains why the interaction between liquidity risk and credit risk affects bond pricing.

Financial inclusion has a wide range of positive effects on sustainable development, but studies indicate a lack of awareness about financial services in the large group of financially excluded individuals within the economy. This paper examines the mediating effects of financial literacy and the moderating role of social capital on the relationship between financial inclusion and sustainable development in Cameroon. A PLS-SEM model was used with 488 collected samples as empirical data from the residents of the Douala and Buea municipalities in Cameroon through a questionnaire survey. Financial inclusion was found to be positive and significantly related to financial literacy, and to have a positive and significant impact on sustainable development. Financial literacy and social capital positively and significantly affect sustainable development in Cameroon. However, financial literacy mediates, while social capital does not moderate the relationship between financial inclusion and sustainable development. The mediation is complementary because both the direct and indirect relationships are significant. The findings and contributions of this study provide useful insights and practical implications for financial institutions and governments, especially in developing countries. It provides empirical evidence and a better understanding of the link between financial inclusion and sustainable development, and the mediating effects and moderating role of financial literacy and social capital.

This paper analyzes the influence of downside risk on defaultable bond returns. By introducing a defaultable bond-trading model, we show that the decline in market risk tolerance and information accuracy leads to trading loss under downside conditions. Our empirical analysis indicates that downside risk can explain a large proportion of the variation in yield spreads and contains almost all valid information on liquidity risk. As the credit level decreases, the explanatory power of downside risk increases significantly. We also investigate the predictive power of downside risk in cross-sectional defaultable bond excess returns using a portfolio-level analysis and Fama-MacBeth regressions. We find that downside risk is a strong and robust predictor for future bond returns. In addition, due to the higher proportion of abnormal transactions in the Chinese bond market, downside risk proxy semi-variance can better explain yield spreads and predict portfolio excess returns than the proxy value at risk.

This study investigates the role of moving averages of trading volume on asset pricing. We find that the distance between short- and long-term moving averages of trading volume (MAVD) strongly and negatively predicts the cross-section of stock returns in the Chinese stock market. This predictive power is robust after controlling for other firm characteristics, well-known risk factors and market timing, and goes well beyond the price-based distance predictor. Moreover, the MAVD effect diminishes as portfolio holding months move further away from the portfolio formation month and even reverses at the end of the second year, which suggests that stock market overreacts to the information from MAVD and the resulting mispricing is gradually corrected. Our results also show that the MAVD effect is stronger in stocks with high limits of arbitrage and more investor attention, as well as in the periods of high sentiment and high investor overconfidence, which is consistent with behavioral mispricing explanations. Furthermore, we find that the MAVD effect is likely to be attributable to individual speculative trading behavior. Finally, the evidence indicates that the predictive power of MAVD is more pronounced among high volatility stocks rather than among low volatility stocks.

As a central issue in macro-finance studies, the spanning hypothesis has always been the focus of research. Previous studies have focused on whether this hypothesis holds true in developed markets, while paying little attention to that in emerging markets. Because of their unique monetary systems, governments in most emerging markets play a key role in bond returns. This study identifies macroeconomic factors for forecasting excess returns in emerging government bond markets under spanning hypothesis. We find that in previous research, government intervention factors employed in excess returns forecasting have no additional predictive ability, as they are already incorporated in current yields. Using dynamic factor analysis, we find that macroeconomic information, including pure macroeconomic activities and financial factors, has robust incremental predictive power for in-sample and out-of-sample bond excess returns.

Exposure to images on the impact of climate change has been shown to trigger low-carbon awareness and behaviors in individuals. In this study, pre-exposure to photographs of climate change impact, low-carbon awareness, and behaviors of a control group and an experimental group were not significantly different. However, following exposure, the two groups showed significant differences in terms of low-carbon awareness and behavior. Moreover, the experimental group was found to have better low-carbon awareness and behavior than the control group without exposure. Therefore, exposure to climate change impact photographs may play an important role in promoting low-carbon awareness and behavior. The findings have significant implications for climate change and low-carbon policy-making.

This paper proposes a generalized bond pricing model, accounting for all the effects of credit risk, liquidity risk, and their correlation. We use an informed trading model to specify the bond liquidity payoff and analyze the sources of liquidity risk. We show that liquidity risk arises from reduced information accuracy and market risk tolerance, and it is market risk tolerance that links credit and liquidity. Then, we extend the traditional bond pricing model with only credit risk by incorporating liquidity risk into the framework in which the probabilities of the two risk events are estimated by a joint distribution. Using numerical examples, we analyze the role of the correlation between credit and liquidity in bond pricing, especially during a financial crisis. We document that the varying correlation between default and illiquidity explains the phenomenon of bond death spiral observed in a financial crisis. Finally, we take the US corporate bond market as an example to demonstrate our conclusions.

This study investigates the factors impacting the price difference between the interbank market and the exchange market for the same bond using a large transaction dataset from July 2006 to June 2016 in China. We find that market liquidity and macrofactors mainly affect the price difference between the two markets for the same bond. And individual bond liquidity explains only a small part of the price difference. We also find that the interaction between liquidity and credit risk is an important factor affecting the price difference, and the effect is greater during financial crisis.

This study examines the cross-sectional return predictability of technical trading index and tests whether the source and the persistence of technical trading effect is the result of idiosyncratic volatility limiting arbitrage in the Chinese stock market. By eliminating common noise components in technical indicators, we propose a new technical trading index, TECHIWC, which negatively predicts future returns from short to long terms. This predictive power is not subsumed by other well-known firm characteristics. Furthermore, we find that the relationship between the TECHIWC effect and idiosyncratic volatility is significantly positive, which is consistent with idiosyncratic volatility limiting arbitrage of the TECHIWC effect. Finally, this relationship is robust to consideration of other limits of arbitrage, market states, and alternative specifications of idiosyncratic volatility.

This study investigates the financialization of China's futures market from a market-integration perspective. First, this study examines the integration between the commodity market and financial capital markets (stock/bond/foreign exchange markets) by using multivariate GARCH models. We find that China's commodity futures market, especially the energy futures market, has financialization phenomenon. Moreover, the energy futures market plays a leading role in the integration between the commodity and stock markets. Considering that commodity market financialization is intimately associated with financial investment, this study analyzes the optimal intermarket risk hedging and asset allocation strategies between commodities and financial assets during its financialization.

Using a sample of U.S. and Chinese stocks between July 1999 and June 2016, we investigate the pricing role of informational inefficiency in stock markets. We find that the relations between returns and the informational inefficiency factor statistically change from significantly positive, to insignificant, and further to significantly negative as informational efficiency increases. This finding provides new insights into the common belief that emerging markets are less efficient than developed markets. We propose new factor models for less efficient markets. Our conclusions are robust to alternative ways of sorting portfolios, to various subsample analyses, and to alternative factor models.

This paper investigates bond return predictability and its economic value. Using regression models, we first examine both the statistical and economic significance of bond return predictability in the Chinese market, and analyze the non-Markov and stochastic volatility properties of bond yields. On the basis of the above analysis, we propose a systematic method for constructing non-Markov dynamic term structure models (DTSMs) under a generalized Heath-Jarrow-Morton (HJM) framework with stochastic volatility. Then, we investigate the roles of the non-Markov property and stochastic volatility in bond return predictability and its economic gains realizing. Finally, we analyze the economic drivers of bond return predictability. Empirical results show that bond return predictability in the Chinese market is statistically significant, which also can be converted into significant economic gains. The non-Markov property and stochastic volatility are of critical importance for this conversion process. Moreover, time-varying risk premia driven by the economic environment are the main source of the bond return predictability in the Chinese market, while unspanned stochastic volatility factors also contain much information for future bond returns.

债券收益的可预测性及其经济价值一直是颇具争议的热点问题.本文首先利用回归模型检验了我国债券收益的可预测性,并分析了债券收益的非马尔科夫性和随机波动特征.在此基础上,在广义随机波动HJM框架下提出了非马尔科夫DTSM模型的构建方法,并分析了非马尔科夫性和随机波动性对于债券超额收益的可预测性及其经济价值实现的作用.最后,考察了我国市场上债券收益可预测性的来源.结果表明,我国债券收益可预测性具有很强的统计显著性,且可以转化为显著的经济收益.在此过程中,非马尔科夫性、随机波动性具有十分关键的作用.经济环境驱动的时变性风险溢价是我国债券收益可预测性的主要来源,而非涵盖随机波动因子也显著含有债券收益的预测信息.

Allocating emission quotas among provinces fairly and efficiently is a critical issue for China. We developed a carbon quota allocation framework at the provincial level considering both the equity and efficiency principles based on a multi-objective non-linear programming model. We established a carbon Gini coefficient and an emission abatement cost function to measure the equity and efficiency of quota allocation, respectively. We then introduced them as objectives into a multi-objective non-linear programming model and obtained the optimal emission quota allocation for 30 provinces in China, by realizing the trade-off between the equity and efficiency principles. Our analysis revealed that Chinese carbon emissions have not yet peaked and that the proportion of carbon emission in each province is similar. Moreover, provinces with higher GDP per capita, carbon intensity, and historical accumulated carbon emissions should shoulder more burden of carbon intensity reduction and higher marginal reduction costs. The rationality analysis indicates that our method outperforms traditional methods according to the principles of both equity and efficiency. We conclude by offering policy recommendations for the establishment of a national unified carbon market.

Although a wealth of studies on companies' environmental behavior exists, little is known about the factors with the greatest influence on the evolution of such behavior. Thus, employing empirical data on China and an agent-based simulation model, this study examines the evolution from defensive to preventive environmental behavior. The results show that community support is the most important factor in this process, followed by managers' environmental awareness and companies' financial ability. However, financial ability is the most significant factor in the evolution from preventive to enthusiastic environmental behavior, followed by managers' environmental awareness and community support. Our identification of the most important factors can serve as a basis for decision makers to focus on improving the operational effectiveness of environmental policies.