Lottery mindset, mispricing and idiosyncratic volatility puzzle: Evidence from the Chinese stock market

Hoang Van Hai; Jong Won Park; Ping Chen Tsai; Cheoljun Eom

doi:10.1016/j.najef.2020.101266

Lottery mindset, mispricing and idiosyncratic volatility puzzle: Evidence from the Chinese stock market

Hoang Van Hai, Jong Won Park, Ping Chen Tsai, Cheoljun Eom

School of Business Administration

Research output: Contribution to journal › Article › peer-review

13 Scopus citations

Abstract

This study investigates the MAX effect regarding lottery mindset in the Chinese stock market. The MAX effect significantly affects stock returns through quintile portfolio and cross-sectional regression analyses. The most-overpriced stock groups, as categorized by mispricing index, show more support for the MAX effect. However, the idiosyncratic volatility (IVOL) effect continues regardless of consideration for the MAX effect, indicating that the MAX effect is not a source of the IVOL effect. Our results suggest that the MAX effect, which is highly relevant for overpriced stocks, might have information for determining stock price, and appears to be independent from information of the IVOL effect in the Chinese stock market.

Original language	English
Article number	101266
Journal	North American Journal of Economics and Finance
Volume	54
DOIs	https://doi.org/10.1016/j.najef.2020.101266
State	Published - Nov 2020

Keywords

Emerging stock market
Idiosyncratic volatility
Lottery mindset
MAX effect
Mispricing

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10.1016/j.najef.2020.101266

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title = "Lottery mindset, mispricing and idiosyncratic volatility puzzle: Evidence from the Chinese stock market",

abstract = "This study investigates the MAX effect regarding lottery mindset in the Chinese stock market. The MAX effect significantly affects stock returns through quintile portfolio and cross-sectional regression analyses. The most-overpriced stock groups, as categorized by mispricing index, show more support for the MAX effect. However, the idiosyncratic volatility (IVOL) effect continues regardless of consideration for the MAX effect, indicating that the MAX effect is not a source of the IVOL effect. Our results suggest that the MAX effect, which is highly relevant for overpriced stocks, might have information for determining stock price, and appears to be independent from information of the IVOL effect in the Chinese stock market.",

keywords = "Emerging stock market, Idiosyncratic volatility, Lottery mindset, MAX effect, Mispricing",

author = "Hai, {Hoang Van} and Park, {Jong Won} and Tsai, {Ping Chen} and Cheoljun Eom",

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year = "2020",

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doi = "10.1016/j.najef.2020.101266",

language = "English",

volume = "54",

journal = "North American Journal of Economics and Finance",

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AU - Hai, Hoang Van

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AU - Tsai, Ping Chen

AU - Eom, Cheoljun

PY - 2020/11

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AB - This study investigates the MAX effect regarding lottery mindset in the Chinese stock market. The MAX effect significantly affects stock returns through quintile portfolio and cross-sectional regression analyses. The most-overpriced stock groups, as categorized by mispricing index, show more support for the MAX effect. However, the idiosyncratic volatility (IVOL) effect continues regardless of consideration for the MAX effect, indicating that the MAX effect is not a source of the IVOL effect. Our results suggest that the MAX effect, which is highly relevant for overpriced stocks, might have information for determining stock price, and appears to be independent from information of the IVOL effect in the Chinese stock market.

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Lottery mindset, mispricing and idiosyncratic volatility puzzle: Evidence from the Chinese stock market

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Keywords

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