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Journal article
Predicting extreme returns and portfolio management implications
Journal of financial research, Vol.36(4)
36
2013
Abstract
We consider which readily observable characteristics of individual stocks may be used to forecast subsequent extreme price movements. We believe we are the first to explicitly consider the predictive influence of option implied volatility in such a framework, which we unsurprisingly find to be an important indicator. However, after controlling for implied volatility levels, other factors, particularly firm age and size, still have additional predictive power of extreme returns. Furthermore, excluding predicted extreme return stocks leads to a portfolio that has lower risk (standard deviation of returns and lower beta) without sacrificing performance.
Details
- Title
- Predicting extreme returns and portfolio management implications
- Publication Details
- Journal of financial research, Vol.36(4)
- Resource Type
- Journal article
- Publisher
- Wiley-Blackwell Publishing, Inc.; United States
- Series
- 36
- Format
- pdf
- Number of pages
- 36
- Copyright
- 2013 The Southern Finance Association and the Southwestern Finance Association
- Identifiers
- 99380090338506600
- Academic Unit
- Accounting and Finance; Lewis Bear Jr. College of Business
- Language
- English