A tail of two worlds : stock crashes, market contexts, and expected returns

S. Ghon RHEE, Feng WU

Research output: Other Conference ContributionsPresentationPresentation

Abstract

Stocks with the potential for crashes in better market conditions are compensated by higher expected returns than stocks with the potential for equally severe crashes in worse market contexts. The impact of market context on returns is more pronounced among stocks with less institutional holdings and when the potential crash is rarer and bigger. The effect also becomes stronger in recent decades. Beta, size, book to market ratio, momentum, liquidity, investment growth, and profitability cannot explain this phenomenon, which is not driven by micro sized or penny stocks either. These results are consistent with the implication of the salience based asset pricing model.
Original languageEnglish
Publication statusPublished - 28 Oct 2017
Externally publishedYes
Event14th Chinese Financial Annual Meeting = 第十四届中国金融学年会 - Shanghai University of Finance and Economics, China
Duration: 28 Oct 2017 → …

Conference

Conference14th Chinese Financial Annual Meeting = 第十四届中国金融学年会
CountryChina
Period28/10/17 → …

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Ghon RHEE, S., & WU, F. (2017). A tail of two worlds : stock crashes, market contexts, and expected returns. 14th Chinese Financial Annual Meeting = 第十四届中国金融学年会, China.