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Highlighting the importance of benchmark to identify lottery-like payoffs of stocks, this study proposes that investors’ lottery preference is formed toward tracking stocks’ performance over time. Accordingly, we develop a strategy based on time-dependent maximum daily return (denoted as TMAX) by buying (short selling) stocks with the most recent maximum daily returns (MAX) ranked in the bottom (top) decile of the historical distribution. The TMAX strategy generates significant premium that subsumes the profitability of Bali, Cakici, and Whitelaw’s (2011) MAX strategy, but not vice versa. A major advantage of the TMAX strategy is its time-invariant profitability across different periods and sentiment states. Further analyses show that the TMAX premium can be explained by shorting flow and behavioral theories, supporting the time-dependent feature of lottery preference.

Based on a setting of multi-market trading that involves American Depositary Receipts (ADRs) and underlying equities, we develop measures of price delay to capture the return predictability for both ADRs and the underlying equity markets. We show that ADRs with the severest price delay in responding to underlying equities command a remarkably high premium. The price delay of underlying equity in responding to corresponding ADR returns also positively predicts future returns of the equity. We further document evidence that limits to arbitrage explain the price delay premia in both markets.

A logistic regression model was used to investigate the effects of financial literacy, financial advisors, and information sources on life insurance participation. Our empirical findings suggest that people with high financial literacy are more likely to purchase life insurance and that consultations with financial advisors and conversations with family members and friends are both positively associated with the demand for life insurance. Participant characteristics, such as age, gender, marital status, working status, and personal income, are also major factors affecting the demand for life insurance. Moreover, the Taiwan Financial Supervisory Commission education program can increase the demand for life insurance.

By proposing a measure of limit-hit frequency, this paper provides the first investigation to understand whether and how price limits are related to the cross-section of stock returns. Based on a sample of listed stocks in Taiwan, we show that the value premium is stronger among stocks with lower limit-hit frequency. This evidence is consistent with the prediction of the limited-attention explanation and rejects the limits-to-arbitrage hypothesis for the value premium in Taiwan. Further analyses indicate that the association between limit-hit frequency and the value premium is robust to several alternative explanations.

Prior literature widely documents that the Taiwan stock market exhibits no momentum premium. We attribute this phenomenon to the frequent transitions of the market and hypothesize that the momentum strategy can be profitable when the effect of market dynamics is taken into consideration. Confirming this notion, we document significantly positive momentum profits in Taiwan when the market continues in the same state. The momentum strategy during periods of market transitions, however, exhibits significant reversals. We provide evidence in support of the overconfidence hypothesis in explaining our findings by showing that the significantly positive momentum profit is concentrated in stocks that attract more investor attention. Further investigations show that our results are robust to the inclusion of several conditioning variables, suggesting the uniqueness and importance of market dynamics in momentum investing in Taiwan.

The earnings momentum generates remarkably high profits in Taiwan, a market that has been widely documented to exhibit no momentum premium for conventional momentum strategies. Using the measure of information discreteness (ID) to identify the information flows of stock prices, we find that higher magnitudes of earnings surprises tend to occur in firms that attract less investor attention. Taking advantage of this observation, we confirm the prediction of the underreaction hypothesis by showing that earnings momentum profits are higher among stocks with more continuous information that is ignored by investors. Further, we propose that price limits are related to ID because they represent attention-grabbing events. We examine a modification of ID by considering the effect of price limits to explicitly isolate the continuous information from the discrete information. The evidence based on this modification provides more robust support for the underreaction hypothesis and rejects the overreaction hypothesis in explaining the profitability of the earnings momentum in Taiwan.

We show that stocks with extreme absolute strength are highly volatile and thus attenuate the profitability of momentum in Taiwan, a market that has been widely documented as an exception of the momentum phenomenon. An enhanced momentum strategy that removes these stocks from the winner and loser portfolios generates significant profitability in the intermediate term. A major advantage of the enhanced momentum strategy is its robust profitability over time. More importantly, it is free from the momentum crashes. We provide further evidence to show that return dispersion and information uncertainty are closely related to momentum profitability in the cross-section when stocks with extreme absolute strength are removed.

Based on the relationship between debt financing and corporate governance, the paper makes an empirical study on the relationship between debt financing and private benefit of control (PBC) of listed company in China. The findings are as follows: Firstly, considering the special ownership structure in China, debt financing governance effect is dispositive, the effect of debt financing on corporate governance and agency cost of substantial shareholder is insignificant; Secondly, special ownership structure in listed company has insignificant adjustment on the relationship between debt financing and PBC; Finally, the first and largest shareholder equity ratio is essential to PBC, the influence of other big shareholders’ restriction in reducing the effects of PBC is not significant.