The MAX effect: European evidence

Christian Walkshäusl

Journal of Banking & Finance, 2014, vol. 42, issue C, 1-10

Abstract: The maximum daily return over the previous month (MAX) of Bali et al. (2011) is a strong and significant predictor of future stock returns in non-U.S. equity markets. Once it is controlled for MAX in the cross-section of average returns, the puzzling negative idiosyncratic volatility-return relation disappears. Consistent with the assumption that MAX is the true effect, for which idiosyncratic volatility is just a proxy, we find that MAX can be traced back to firm fundamentals in the manner of idiosyncratic volatility. The negative MAX-return relation is stronger among firms with high cash flow volatility and weaker among firms with high profitability.

Keywords: Maximum daily return; Cross-sectional return predictability; International markets; Idiosyncratic volatility; Cash flow volatility; Profitability (search for similar items in EconPapers)
JEL-codes: G11 G12 G15 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S037842661400034X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:42:y:2014:i:c:p:1-10

DOI: 10.1016/j.jbankfin.2014.01.020

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().