Extreme returns and the investor’s expectation for future volatility: Evidence from the Finnish stock market

Syed Riaz Mahmood Ali, Shaker Ahmed and Ralf Östermark

The Quarterly Review of Economics and Finance, 2020, vol. 76, issue C, 260-269

Abstract: 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 investor’s 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.

Keywords: MAX effect; Extreme return; Sentiment (search for similar items in EconPapers)
JEL-codes: G01 G21 G30 G32 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:76:y:2020:i:c:p:260-269

DOI: 10.1016/j.qref.2019.08.009

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