Extreme Downside Risk and Expected Stock Returns

摘要：

We construct the extreme downside risk (EDR) measure of a stock with the maximum likelihood estimation of the left tail index in the classical generalized extreme value distribution. We find a significant positive premium on EDR in cross-section of stock returns even after controlling for firm size, book-to-market ratio, return reversal, momentum, and liquidity effects. EDR serves as a good indicator of extreme market downside movements. Small stocks and value stocks on average expose to higher EDR. In addition, we also find high-EDR stocks generally exhibit high idiosyncratic volatility, large negative co-skewness, and high bankruptcy risk. However, the significance of positive EDR premium remains robust even after controlling for these effects.

关键词： Extreme Downside Risk Asset Pricing Maximum Likelihood Estimation Generalized Extreme Value Distribution Idiosyncratic Volatility Bankruptcy Risk

作者: Wei Huang Qianqiu Liu S. Ghon Rhee Feng Wu

作者单位: Department of Financial Economics and Institutions,Shidler College of Business,University of Hawaii Department of Financial Economics and Institutions,Shidler College of Business,University of Hawaii Department of Financial Economics and Institutions,Shidler College of Business,Universityof Hawaii a

会议类型: 国际会议

会议名称: 2008年中国金融国际年会

会议地点: 大连

会议语种:英文

页码: 1-40

在线出版日期: 2008-07-02（万方平台首次上网日期，不代表论文的发表时间）