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Media type:
E-Article
Title:
Extreme returns and idiosyncratic risks: evidence from an emerging market
Contributor:
Cho, Eunyoung
Published:
Emerald, 2021
Published in:
Journal of Derivatives and Quantitative Studies: 선물연구, 29 (2021) 1, Seite 29-48
Language:
English
DOI:
10.1108/jdqs-09-2020-0022
ISSN:
1229-988X;
2713-6647
Origination:
Footnote:
Description:
In this paper, we show that there is a negative premium for MAX stocks in the Korean stock market. However, there is no evidence that the MAX effect overwhelms the effects of idiosyncratic risk. When we control for idiosyncratic risk, the negative relationship between extreme returns and future returns is less robust. Rather, the cross-effect of the extreme returns and the idiosyncratic risk factors explains the negative premium. Furthermore, our results are not fully explained by the exposure to the market timing and economic state. Overall, both the extreme return and idiosyncratic risk effects appear to coexist in the Korean stock market, but they are not independently.