Date: 12 March 2025, Wednesday
\nTime: 10.30 \u2013 11.30
\nPlace: MA-330<\/p>\n
\u201cDigging into maxing out: A re-examination of the MAX anomaly\u201d<\/p>\n
by<\/p>\n
Bar\u0131\u015f \u0130nce
\nUniversity College Dublin<\/p>\n
Abstract
\nWe re-examine the MAX anomaly, which the literature attributes to investors\u2019 preference for lottery-like stocks. We find that, when using value-weighted portfolios, the mispricing factors introduced by Stambaugh and Yuan (2017) explain the anomaly. Also, the anomaly occurs, i.e., stocks with extremely high daily returns in the prior month (namely, high MAX stocks) generate significant negative returns over the subsequent month, only when these stocks exhibit persistence in extreme daily returns in earlier months. This contradicts with the prevalent view that high MAX stocks are lottery-like. We propose an alternative sorting order to MAX, namely MAX^beta, which controls for the effect of market-wide movements on stock-level daily returns. Portfolio sorts by MAX^beta have significant predictive power, and this cannot be accounted for by the mispricing factors. Moreover, the predictive power of MAX^beta does not depend on whether or not stocks exhibit persistent past performance in extreme daily returns, rendering MAX^beta sorts a more likely proxy for lottery-like features as compared to MAX sorts.<\/p>\n
Bio
\nDr. Baris Ince\u2019s research focuses on empirical asset pricing, behavioral finance, robotics, and corporate finance. His research has been published in finance journals including the Review of Asset Pricing Studies, Journal of Banking and Finance and Journal of Financial Markets. He holds a Ph.D. in Economics from Koc University, Istanbul.<\/p>\n","protected":false},"excerpt":{"rendered":"
Date: 12 March 2025, Wednesday Time: 10.30 \u2013 11.30 Place: MA-330 \u201cDigging into maxing out: A re-examination of the MAX anomaly\u201d by Bar\u0131\u015f \u0130nce University College Dublin Abstract We re-examine the MAX anomaly, which the literature attributes to investors\u2019 preference for lottery-like stocks. We find that, when using value-weighted portfolios, [\u2026] <\/p>\n