32 research outputs found
Extreme returns and the investorâs expectation for future volatility: Evidence from the Finnish stock market
We examine the significance of
extreme positive returns of the previous month
(MAX) as a return predictor in the Finnish stock market. We show that high fear
months, i.e., months associated with the
investorâs high expectation for future volatility, are accompanying with low MAX
effect implying that investors reluctant to gamble in high MAX stocks when they have high expectation for future
volatility.</p
Are idiosyncratic risk and extreme positive return priced in the Indian equity market?
In this paper, we examine whether the IVOL (Idiosyncratic Volatility) and MAX (Extreme PositiveReturn) can predict future returns in the Indian stock market where a short sale is restricted withno naked short sale allowed. We find that both IVOL and MAX have significantly positive andpersistent effects on expected returns in this market. In subsamples, we document that small firmshave positive IVOL and MAX effects. However, more interestingly, after including all the controls,in contrast to the finding of Bali et al. (2011), the IVOL and MAX effects are significantly negativefor the large firms in this market implying the investorsâ response to IVOL and MAX with theperception of low growth prospects of large firms. We use both portfolio level and firm-level FamaMacbeth cross-sectional analysis to show the effects.  </p