Lottery-like preferences and the MAX effect in the cryptocurrency market

Melisa Ozdamar (), Levent Akdeniz () and Ahmet Sensoy
Additional contact information
Melisa Ozdamar: Bilkent University
Levent Akdeniz: Bilkent University

Financial Innovation, 2021, vol. 7, issue 1, 1-27

Abstract: Abstract We investigate the significance of extreme positive returns in the cross-sectional pricing of cryptocurrencies. Through portfolio-level analyses and weekly cross-sectional regressions on all cryptocurrencies in our sample period, we provide evidence for a positive and statistically significant relationship between the maximum daily return within the previous month (MAX) and the expected returns on cryptocurrencies. In particular, the univariate portfolio analysis shows that weekly average raw and risk-adjusted return differences between portfolios of cryptocurrencies with the highest and lowest MAX deciles are 3.03% and 1.99%, respectively. The results are robust with respect to the differences in size, price, momentum, short-term reversal, liquidity, volatility, skewness, and investor sentiment.

Keywords: Cryptocurrencies; MAX effect; Lottery-like preference; Cross-sectional predictability (search for similar items in EconPapers)
JEL-codes: G11 G12 G17 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://link.springer.com/10.1186/s40854-021-00291-9 Abstract (text/html)

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:spr:fininn:v:7:y:2021:i:1:d:10.1186_s40854-021-00291-9

Ordering information: This journal article can be ordered from
http://www.springer. ... nomics/journal/40589

DOI: 10.1186/s40854-021-00291-9

Access Statistics for this article

Financial Innovation is currently edited by J. Leon Zhao and Zongyi

More articles in Financial Innovation from Springer, Southwestern University of Finance and Economics
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().