We examine whether investors overpay for the stocks with prior extreme positive returns, and test whether differences in culture among countries explain cross-country differences in the degree to which investors overpay for those stocks. Differences in culture are measured by
Uncertainty Avoidance Index of Hofstede et al. (2010), which reflects country-level aggregate risk appetite. Using data from 44 countries for 1990-2012, we find evidence that stocks with the highest maximum daily returns in the previous month (MAX) are overpriced, resulting in the negative relation between MAX and returns in the subsequent month across the countries. The inclusion of MAX in cross-sectional regressions makes the well-known negative relation between idiosyncratic volatility and expected returns, “the idiosyncratic volatility puzzle”,
vanish in global financial markets. Furthermore, we show that overpaying for stocks with lottery-like payoff is more conspicuous in those countries with relatively lower uncertainty avoidance, after controlling for a set of country-level variables. Our results suggest that cultural
differences do affect cross-sectional pricing of stocks across countries.
Keywords: International finance, Lottery, Extreme returns, Idiosyncratic volatility, Uncertainty Avoidance
자료실
자료실
[2014년 제 4차] Maxing out globally: MAX-premium, uncertainty avoid
작성자 : 관리자
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게시일 :
2014-12-12