Arbitrage risk and the turnover anomaly

Pin Huang Chou, Tsung Yu Huang, Hung Jeh Yang

Research output: Contribution to journalArticlepeer-review

17 Scopus citations


A strong turnover premium exists such that stocks with lower turnover have higher future returns in the 5. years following their formation than those with higher turnover. This turnover premium cannot be explained by existing asset-pricing models, a risk-based liquidity factor, or anomalies such as size, book-to-market ratio, or momentum. Further analysis indicates that the turnover premium is greater for stocks with higher idiosyncratic volatility, higher transaction costs, lower institutional ownership, and lower investor sophistication, which implies it is consistent with the mispricing explanation based on arbitrage risk.

Original languageEnglish
Pages (from-to)4172-4182
Number of pages11
JournalJournal of Banking and Finance
Issue number11
StatePublished - Nov 2013


  • Arbitrage risk
  • Asset-pricing anomaly
  • Differences of opinion
  • Investor sophistication
  • Turnover


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