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

77 Pages Posted: 10 Aug 2013 Last revised: 5 Apr 2021

See all articles by Andrew Ang

Andrew Ang

BlackRock, Inc

Assaf A. Shtauber

Columbia University - Columbia Business School

Paul C. Tetlock

Columbia Business School - Finance

Date Written: August 2013

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.

Suggested Citation

Ang, Andrew and Shtauber, Assaf A. and Tetlock, Paul C., Asset Pricing in the Dark: The Cross Section of OTC Stocks (August 2013). NBER Working Paper No. w19309, Available at SSRN: https://ssrn.com/abstract=2308277

Andrew Ang (Contact Author)

BlackRock, Inc ( email )

55 East 52nd Street
New York City, NY 10055
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 ( email )

3022 Broadway
New York, NY 10027
United States

HOME PAGE: http://www0.gsb.columbia.edu/faculty/ptetlock/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
40
Abstract Views
917
PlumX Metrics