Crash Sensitivity and the Cross-Section of Expected Stock Returns

Ruenzi, Stefan ; Weigert, Florian ; Chabi-Yo, Fousseni

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Document Type: Working paper
Year of publication: 2015
The title of a journal, publication series: Working papers on finance / University of St.Gallen, School of Finance Research Paper
Volume: 13-24
Place of publication: St. Gallen
Edition: Version December 2015
Publication language: English
Institution: Außerfakultäre Einrichtungen > Graduate School of Economic and Social Sciences - CDSB (Business Studies)
Business School > Internat. Finanzierung (Ruenzi)
Subject: 330 Economics
Abstract: We examine whether investors receive a compensation for holding crash-sensitive stocks. We capture the crash sensitivity of stocks by their lower tail dependence with the market based on copulas. Stocks with strong contemporaneous crash sensitivity clearly outperform stocks with weak crash sensitivity and a trading strategy based on past crash sensitivity delivers positive abnormal returns of about 4% p.a. This effect cannot be explained by traditional risk factors and is different from the impact of beta, downside beta, and coskewness. Our findings are consistent with results from the empirical option pricing literature and support the notion that stock market investors are crash-averse.
Additional information: Version June 2014 s. Weitere URL

Dieser Eintrag ist Teil der Universitätsbibliographie.

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