The MAX effect and what drives it - Evidence from the Swedish stock market

Detta är en C-uppsats från Handelshögskolan i Stockholm/Institutionen för finansiell ekonomi

Sammanfattning: Inspired by previous findings on the cross-sectional relationship between extreme positive daily stock returns and subsequent negative returns in the US and euro-zone markets, we search for its presence in the Swedish market. We argue that this effect, known as the MAX effect, is mainly driven by individual investors seeking lottery-like payoffs. This makes Sweden an interesting object of study due to its high share of individual investor market participation. We find a monthly return difference for stocks in the 1st and 10th MAX deciles of -1.14%, controlling for known factors such as size, book-to-market, momentum, short term reversal and illiquidity. The MAX effect is also robust for various measures of skewness. To further explore if individual investors drive this effect we use a unique data set to examine individual investor purchasing behavior. We find some indications that individual investors are behind the effect, but cannot exclude the possibility that institutional investors also contribute.

  HÄR KAN DU HÄMTA UPPSATSEN I FULLTEXT. (följ länken till nästa sida)