Abstract

http://ssrn.com/abstract=1817542
 
 

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Asset Pricing in the Dark: The Cross Section of OTC Stocks


Andrew Ang


Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Assaf A. Shtauber


Columbia University - Columbia Business School

Paul C. Tetlock


Columbia Business School - Finance and Economics

July 1, 2013

Netspar Discussion Paper No. 11/2010-093

Abstract:     
Over-the-counter (OTC) stocks are far less liquid, disclose less information, and exhibit lower institutional holdings than listed stocks. We exploit these different market conditions to test theories of cross-sectional return premiums. Compared to premiums in listed markets, the OTC illiquidity premium is several times higher, the size, value, and volatility premiums are similar, and the momentum premium is three times lower. The OTC illiquidity, size, value, and volatility premiums are largest among stocks held predominantly by retail investors and those not disclosing financial information. Theories of differences in investors’ opinions and limits on short sales help explain these return premiums.

Number of Pages in PDF File: 76

Keywords: Illiquidity Premium, Limits to Arbitrage, Disclosure, Over-the-counter Markets, OTC Stocks, Pink Sheets, Bulletin Board, Return Anomalies

JEL Classification: G10, G12, G14

working papers series


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Date posted: April 21, 2011 ; Last revised: August 2, 2013

Suggested Citation

Ang, Andrew and Shtauber, Assaf A. and Tetlock, Paul C., Asset Pricing in the Dark: The Cross Section of OTC Stocks (July 1, 2013). Netspar Discussion Paper No. 11/2010-093. Available at SSRN: http://ssrn.com/abstract=1817542 or http://dx.doi.org/10.2139/ssrn.1817542

Contact Information

Andrew Ang (Contact Author)
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Assaf A. Shtauber
Columbia University - Columbia Business School ( email )
3022 Broadway
New York, NY 10027
United States
Paul C. Tetlock
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States
212-854-9895 (Fax)
HOME PAGE: http://www0.gsb.columbia.edu/faculty/ptetlock/

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