Left-tail momentum: Underreaction to bad news, costly arbitrage and equity returns

• 成果类型: Article
• 署名作者: Atilgan, Yigit; Bali, Turan G.; Demirtas, K. Ozgur; Gunaydin, A. Doruk
• 署名单位: Sabanci University; Georgetown University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2019.07.006
• 发表日期: 2020
• 页码: 725-753
• 关键词: Left-tail risk; momentum; Equity returns; RETAIL INVESTORS; COSTLY ARBITRAGE; investor inattention

摘要

This paper documents a significantly negative cross-sectional relation between left-tail risk and future returns on individual stocks trading in the US and international countries. We provide a behavioral explanation to this anomaly based on the idea that investors underestimate the persistence in left-tail risk and overprice stocks with large recent losses. Thus, low returns in the left-tail of the distribution persist into the future causing left-tail return momentum. We find that the left-tail risk anomaly is stronger for stocks that are more likely to be held by retail investors, that receive less investor attention, and that are costlier to arbitrage. (C) 2019 Elsevier B.V. All rights reserved.