Extreme daily returns and the cross-section of expected returns: Evidence from Brazil

This paper examines whether extreme (positive) daily returns predict the cross-section of monthly stock returns in Brazil. We find a negative effect of the maximum (MAX) daily return on future performance which is in line with the findings from recent studies in the U.S. and Europe. High MAX stocks...

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Detalles Bibliográficos
Autores: Berggrun, L., Cardona, E., Lizarzaburu, E.
Tipo de recurso: artículo
Estado:Versión publicada
Fecha de publicación:2017
País:Colombia
Institución:Universidad de los Andes
Repositorio:Séneca: repositorio Uniandes
Idioma:inglés
OAI Identifier:oai:repositorio.uniandes.edu.co:1992/47004
Acceso en línea:http://hdl.handle.net/1992/47004
https://www.sciencedirect.com/science/article/pii/S0148296317302266
Access Level:acceso abierto
Palabra clave:Emerging markets
Maximum daily return
Idiosyncratic volatility
SkewnessLottery-like stocks
Panel regression
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spelling Extreme daily returns and the cross-section of expected returns: Evidence from BrazilBerggrun, L.Cardona, E.Lizarzaburu, E.Emerging marketsMaximum daily returnIdiosyncratic volatilitySkewnessLottery-like stocksPanel regressionThis paper examines whether extreme (positive) daily returns predict the cross-section of monthly stock returns in Brazil. We find a negative effect of the maximum (MAX) daily return on future performance which is in line with the findings from recent studies in the U.S. and Europe. High MAX stocks appear to cater to some investors who are looking for lottery-like stocks, as extreme positive return stocks offer the possibility of substantial gains with a low probability. Increased demand leads to overpricing of and ensuing lower returns to lottery-like stocks. Other proxies for extreme returns, such as idiosyncratic volatility and skewness, play a much weaker role (if any) as cross-sectional determinants of stock performance. We document that the MAX effect is significant only during economic contractions, thus suggesting that the gambling behavior in the stock market exacerbates during economic downturns.Facultad de Administración2020-10-01T16:51:02Z2020-10-01T16:51:02Z2017Artículo de revistainfo:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionhttp://purl.org/coar/resource_type/c_6501http://purl.org/coar/version/c_ab4af688f83e57aaTexthttp://purl.org/redcol/resource_type/ARTp. 201-211application/pdfhttp://hdl.handle.net/1992/47004https://www.sciencedirect.com/science/article/pii/S0148296317302266instname:Universidad de los Andesreponame:Repositorio Institucional Sénecarepourl:https://repositorio.uniandes.edu.co/reponame:Séneca: repositorio Uniandesinstname:Universidad de los Andesinstacron:Universidad de los AndesengAl consultar y hacer uso de este recurso, está aceptando las condiciones de uso establecidas por los autores.info:eu-repo/semantics/openAccesshttp://purl.org/coar/access_right/c_abf22022-06-02T14:02:55Z
dc.title.none.fl_str_mv Extreme daily returns and the cross-section of expected returns: Evidence from Brazil
title Extreme daily returns and the cross-section of expected returns: Evidence from Brazil
spellingShingle Extreme daily returns and the cross-section of expected returns: Evidence from Brazil
Berggrun, L.
Emerging markets
Maximum daily return
Idiosyncratic volatility
SkewnessLottery-like stocks
Panel regression
title_short Extreme daily returns and the cross-section of expected returns: Evidence from Brazil
title_full Extreme daily returns and the cross-section of expected returns: Evidence from Brazil
title_fullStr Extreme daily returns and the cross-section of expected returns: Evidence from Brazil
title_full_unstemmed Extreme daily returns and the cross-section of expected returns: Evidence from Brazil
title_sort Extreme daily returns and the cross-section of expected returns: Evidence from Brazil
dc.creator.none.fl_str_mv Berggrun, L.
Cardona, E.
Lizarzaburu, E.
author Berggrun, L.
author_facet Berggrun, L.
Cardona, E.
Lizarzaburu, E.
author_role author
author2 Cardona, E.
Lizarzaburu, E.
author2_role author
author
dc.subject.none.fl_str_mv Emerging markets
Maximum daily return
Idiosyncratic volatility
SkewnessLottery-like stocks
Panel regression
topic Emerging markets
Maximum daily return
Idiosyncratic volatility
SkewnessLottery-like stocks
Panel regression
description This paper examines whether extreme (positive) daily returns predict the cross-section of monthly stock returns in Brazil. We find a negative effect of the maximum (MAX) daily return on future performance which is in line with the findings from recent studies in the U.S. and Europe. High MAX stocks appear to cater to some investors who are looking for lottery-like stocks, as extreme positive return stocks offer the possibility of substantial gains with a low probability. Increased demand leads to overpricing of and ensuing lower returns to lottery-like stocks. Other proxies for extreme returns, such as idiosyncratic volatility and skewness, play a much weaker role (if any) as cross-sectional determinants of stock performance. We document that the MAX effect is significant only during economic contractions, thus suggesting that the gambling behavior in the stock market exacerbates during economic downturns.
publishDate 2017
dc.date.none.fl_str_mv 2017
2020-10-01T16:51:02Z
2020-10-01T16:51:02Z
dc.type.none.fl_str_mv Artículo de revista
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
http://purl.org/coar/resource_type/c_6501
http://purl.org/coar/version/c_ab4af688f83e57aa
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format article
status_str publishedVersion
dc.identifier.none.fl_str_mv http://hdl.handle.net/1992/47004
https://www.sciencedirect.com/science/article/pii/S0148296317302266
instname:Universidad de los Andes
reponame:Repositorio Institucional Séneca
repourl:https://repositorio.uniandes.edu.co/
url http://hdl.handle.net/1992/47004
https://www.sciencedirect.com/science/article/pii/S0148296317302266
identifier_str_mv instname:Universidad de los Andes
reponame:Repositorio Institucional Séneca
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dc.language.none.fl_str_mv eng
language eng
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eu_rights_str_mv openAccess
rights_invalid_str_mv http://purl.org/coar/access_right/c_abf2
dc.format.none.fl_str_mv p. 201-211
application/pdf
dc.publisher.none.fl_str_mv Facultad de Administración
publisher.none.fl_str_mv Facultad de Administración
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