Daily Winners and Losers
100 Pages Posted: 14 Mar 2017 Last revised: 16 Dec 2019
Date Written: December 16, 2019
One of the most salient events for a stock is being a daily winner or loser: these stocks are ranked prominently in the media, leading to investor attention spikes. We demonstrate that ranked stocks underperform unranked stocks by over 1.50% during the month after the ranking. To establish causality, we introduce an identification strategy that exploits unconventional return-measurement periods. The ranking effect explains the idiosyncratic volatility puzzle and related return patterns based on maximum daily returns or expected idiosyncratic skewness. Our results are consistent with attention-induced overpricing and provide a simple unifying explanation for important asset pricing anomalies.
Keywords: Stock rankings, investor attention, idiosyncratic volatility puzzle, retail investors
JEL Classification: G11, G12, G14
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