Stocks with extreme past returns: Lotteries or insurance?

Alexander Barinov

Journal of Financial Economics, 2018, vol. 129, issue 3, 458-478

Abstract: The paper shows that lottery-like stocks are hedges against unexpected increases in market volatility. The loading on the aggregate volatility risk factor explains the majority of low abnormal returns to stocks with high maximum returns in the past month (Bali et al., 2011) and high expected skewness (Boyer et al., 2010). Aggregate volatility risk also explains the new evidence that the maximum effect and the skewness effect are stronger for firms with high market to book or high expected probability of bankruptcy.

Keywords: Extreme returns; Skewness; Lottery; Idiosyncratic volatility; Aggregate volatility risk (search for similar items in EconPapers)
JEL-codes: E44 G11 G12 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:129:y:2018:i:3:p:458-478

DOI: 10.1016/j.jfineco.2018.06.007

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