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Replication of Reference-Dependent Preferences and the Risk-Return Trade-Off in the Chinese Market
Penggan Xu
https://arxiv.org/abs/2505.20608 https://

Replication of Reference-Dependent Preferences and the Risk-Return Trade-Off in the Chinese Market
This study replicates the findings of Wang et al. (2017) on reference-dependent preferences and their impact on the risk-return trade-off in the Chinese stock market, a unique context characterized by high retail investor participation, speculative trading behavior, and regulatory complexities. Capital Gains Overhang (CGO), a proxy for unrealized gains or losses, is employed to explore how behavioral biases shape cross-sectional stock returns in an emerging market setting. Utilizing data from 1…