Do investors overpay for stocks with lottery-like payoffs? An examination of the returns of OTC stocks

• 成果类型: Article
• 署名作者: Eraker, Bjorn; Ready, Mark
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2014.11.002
• 发表日期: 2015
• 页码: 486-504
• 关键词: Prospect theory; skewness; Lottery stocks; OTCBB

摘要

We study returns on over-the-counter stocks and find that these returns are extremely negative on average. The distribution of OTC stock returns is highly positively skewed: while many of the stocks in our sample become worthless, a few do extremely well. We investigate whether this negative return premium can be rationalized by investors' preference for positively skewed payoffs. We show that the equilibrium model of Barberis and Huang (2008) provides a plausible explanation for the negative returns. We also show that OTC stocks that once traded on the regular exchanges perform much better than stocks that originate in the OTC markets. (C) 2014 Elsevier B.V. All rights reserved.