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Are extreme negative returns priced in the Indian stock market?

Author

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  • Tariq Aziz
  • Valeed Ahmad Ansari

Abstract

Given some recent empirical evidence showing the predictive ability of maximum daily returns (MAX) in the cross-section of stock returns, we examine the relationship between minimum daily returns (MIN) and subsequent monthly returns in the emerging stock market of India during the period 1999–2014. Our findings suggest that stocks with higher MIN in a month yield higher returns in the subsequent month with some caveats. This MIN effect is present primarily among stocks with lower market capitalization, higher illiquidity, and stocks with low institutional holdings. Furthermore, the application of quantile regression reveals that the relation between MIN and future stock returns is dynamic and quantile dependent

Suggested Citation

  • Tariq Aziz & Valeed Ahmad Ansari, 2018. "Are extreme negative returns priced in the Indian stock market?," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 18(1), pages 76-90, March.
    • Handle: RePEc:bor:bistre:v:18:y:2018:i:1:p:76-90
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    File URL: https://www.sciencedirect.com/science/article/pii/S2214845017300418
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    Citations

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    Cited by:

    1. Ozkan Haykir, 2018. "Does MAX Anomaly Exist in Emerging Market: Evidence from the Turkish Stock Market?," International Journal of Economics and Financial Issues, Econjournals, vol. 8(2), pages 148-153.
    2. Adam Zaremba & Jacob Koby Shemer, 2018. "Price-Based Investment Strategies," Springer Books, Springer, number 978-3-319-91530-2, December.

    More about this item

    Keywords

    MIN effect; Extreme returns; Asset pricing; Quantile regression; Cross-sectional stock returns; Institutional holdings;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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