Risk Perception Factor and Its Pricing in the Chinese Stock Market

Monthly stock returns and accounting data for individual firms are obtained from CSMAR. We include all A-share stocks listed on the Shanghai and Shenzhen stock exchanges, including the main board, the GEM board, and the STAR board. Given the uniformity of accounting data and the sufficient number of observations, the data set spanned 264 months, from January 2000 to December 2021.We obtain the stock universe after applying certain filters, which include removing stocks that (i) are less than six months ago, (ii) have less than 120 trading records in the past year, or (iii) have less than 15 trading records in the previous month. To avoid forward-looking bias, we use the most recent financial data for the accounting metrics before the month for which we choose the characteristics to sort the stocks, such as shareholders’ equity, net profit, minority interest, and so on, in accordance with the availability of financial statements.