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Stocks as lotteries: can extreme positive returns predict future returns? – evidence from Hong Kong stock market

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dc.contributor.author Zeng, Yi en
dc.date.accessioned 2012-01-17T21:42:30Z
dc.date.issued 2011 en
dc.identifier.uri https://hdl.handle.net/10182/4149
dc.description.abstract This study examines the significance of extreme positive returns measured by maximum daily returns in the previous month (MAX) in the Hong Kong stock market from 1990 to 2009. We follow the original study of Bali et al. (2011), who adopted both a portfolio sorting approach and the Fama-Macbeth regressions to test the MAX effect. Of special interest, we also determine if the puzzling negative relationship between the one-month lagged idiosyncratic volatility and future returns documented in Ang et al. (2006, 2009) can be explained by the MAX effect. The results of this study contribute two major findings. First, we found that there was a strong negative relationship between MAX and future stock returns in the subsequent month based on the Fama-Macbeth regressions, but this MAX effect appeared more likely to occur among small stocks. In contrast, we found no MAX effect for large stocks based on portfolio analysis as the idiosyncratic volatility effect explains the MAX effect. Second, we found a significantly negative idiosyncratic volatility effect for large stocks and none for small stocks. In addition, we documented that the MAX effect could potentially reverse the negative relationship between the one-month lagged idiosyncratic volatility and expected returns based on both the equal-weighted portfolio analysis and the Fama-Macbeth regressions, which confirm the findings of Bali et al. (2011) for the U.S. stock market. en
dc.language.iso en en
dc.publisher Lincoln University en
dc.subject MAX en
dc.subject Fama-Macbeth regressions en
dc.subject portfolio sorting approach en
dc.subject idiosyncratic volatility en
dc.title Stocks as lotteries: can extreme positive returns predict future returns? – evidence from Hong Kong stock market en
dc.type Thesis
thesis.degree.grantor Lincoln University en
thesis.degree.level Masters en
thesis.degree.name Master of Commerce and Management en
lu.contributor.unit Lincoln University en
lu.contributor.unit Faculty of Agribusiness and Commerce en
lu.contributor.unit Department of Financial and Business Systems en
pubs.organisational-group /LU
pubs.organisational-group /LU/Faculty of Agribusiness and Commerce
pubs.organisational-group /LU/Faculty of Agribusiness and Commerce/FABS
pubs.publication-status Published en


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