Accounting-based downside risk and expected stock returns: Evidence from China

Yan Luo, Xiaohuan Wang, Chenyang Zhang, Wei Huang

Research output: Journal PublicationArticlepeer-review

3 Citations (Scopus)


We document that earnings downside risk contains information on firms' future operating performance and is positively associated with expected stock returns in Chinese stock markets, and the return predictability of earning downside risk mainly comes from its accrual downside risk component. The pricing of earnings downside risk is especially evident among firms with more transparent information environment and stronger governance efficacy, such as large firms, non-high-tech firms, old firms, and firms with high analyst coverage. Lastly, we show that aggregated earnings downside risk and its components at the market level are all significantly and positively associated with subsequent stock market returns, which is consistent with the notion that the accounting-based downside risk measures contain information about future macroeconomic conditions.

Original languageEnglish
Article number101920
JournalInternational Review of Financial Analysis
Publication statusPublished - Nov 2021


  • Accounting-based downside risk
  • Chinese stock markets
  • Information environment
  • Stock returns

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


Dive into the research topics of 'Accounting-based downside risk and expected stock returns: Evidence from China'. Together they form a unique fingerprint.

Cite this