Author
Alkan, U., Güner, Biliana
Publication Date
2018-07
Publication Place
-
Elsevier
Subject
Lottery preferences, Return anomalies, Investor sentiment, Limits to arbitrage
Type
Periodical
Language
English
Digital
Yes
Manuscript
No
Library
Özyeğin University
Library Asset ID
1042-4431
Record ID
bb4df570-1d68-4085-8e54-94cf1c83e077
Library Location
Business Administration
Date
2018-07
Notes
Ozyegin University's Graduate School of Business
Sample Text
We investigate the existence of lottery-like preferences of investors at Borsa Istanbul. Proxying these preferences with demand for stocks with extreme positive returns (“MAX”), we establish that high-MAX stocks’ significantly underperform low-MAX stocks, controlling for a series of potential explanatory return characteristics. We find that the negative relationship between MAX and expected returns is driven by stocks strongly preferred by individual investors and strengthens following periods of high investor sentiment. A natural experiment suggests that the MAX discount increased during the period of temporary short-sale restrictions at Borsa Istanbul. Our findings suggest a limits-to-arbitrage explanation for the MAX anomaly.
DOI
10.1016/j.intfin.2018.02.015
Cilt
55
