Maxing out: Stocks as lotteries and the cross-section of expected returns

• 成果类型: Article
• 署名作者: Bali, Turan G.; Cakici, Nusret; Whitelaw, Robert F.
• 署名单位: New York University; National Bureau of Economic Research; Fordham University; City University of New York (CUNY) System; Baruch College (CUNY)
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2010.08.014
• 发表日期: 2011
• 页码: 427-446
• 关键词: Extreme returns; Lottery-like payoffs; Cross-sectional return predictability; skewness preference; idiosyncratic volatility

摘要

Motivated by existing evidence of a preference among investors for assets with lottery-like payoffs and that many investors are poorly diversified, we investigate the significance of extreme positive returns in the cross-sectional pricing of stocks. Portfolio-level analyses and firm-level cross-sectional regressions indicate a negative and significant relation between the maximum daily return over the past one month (MAX) and expected stock returns. Average raw and risk-adjusted return differences between stocks in the lowest and highest MAX deciles exceed 1% per month. These results are robust to controls for size, book-to-market, momentum, short-term reversals, liquidity, and skewness. Of particular interest, including MAX reverses the puzzling negative relation between returns and idiosyncratic volatility recently shown in Ang, Hodrick, Xing, and Zhang (2006, 2009). (C) 2010 Elsevier B.V. All rights reserved.