Explaining penny stock returns versus non-penny stock returns from a liquidity perspective
The presence of higher penny stock returns in the Malaysian stock market in recent years may have attracted the attention of investors. On the other hand, it indicates a liquidity risk premium, implying a higher risk associated with the stocks. Employing yearly panel data of 434 penny firms and 319...
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| Main Authors: | , , |
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| Format: | Article |
| Language: | en |
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Accounting Research Institute (ARI) and UiTM Press, Universiti Teknologi MARA
2025
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| Subjects: | |
| Online Access: | https://ir.uitm.edu.my/id/eprint/122495/1/122495.pdf https://ir.uitm.edu.my/id/eprint/122495/ https://apmaj.uitm.edu.my/ |
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| Summary: | The presence of higher penny stock returns in the Malaysian stock market in recent years may have attracted the attention of investors. On the other hand, it indicates a liquidity risk premium, implying a higher risk associated with the stocks. Employing yearly panel data of 434 penny firms and 319 non-penny firms from 1st January 2019 to 31st December 2023, this study aimed to explain penny stock returns versus non-penny stock returns in the Malaysian stock market from a liquidity perspective. The dependent variables were penny and non-penny stock returns in the Malaysian stock market meanwhile, the main independent variable was liquidity. The other independent variables consisted of the factors in the five-factor model; risk, firm size, book-to-market, and momentum. Further, this study employed three static panel data, namely Pooled Ordinary Least Squares, Random Effects Model and Fixed Effects Model. The finding showed that liquidity, book-to-market, and momentum influenced penny stock returns significantly. Simultaneously, liquidity, firm size, and momentum influenced non-penny stock returns in the Malaysian stock market. |
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