|
Archive@NYU >
Stern School of Business >
Finance Working Papers >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27871
|
| Title: | Maxing Out: Stocks as Lotteries and the Cross-Section of Expected Returns |
| Authors: | Whitelaw, Robert
Bali, Turan
Cakici, Nusret |
| Issue Date: | 6-Feb-2009 |
| Series/Report no.: | FIN-08-025 |
| Abstract: | 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 generally subsumes or reverses the
puzzling negative relation between returns and idiosyncratic volatility
recently documented in Ang et al. (2006, 2008). |
| URI: | http://hdl.handle.net/2451/27871 |
| Appears in Collections: | Finance Working Papers
|
All items in Faculty Digital Archive are protected by copyright, with all rights reserved.
|
