Daily Winners and Losers
76 Pages Posted: 14 Mar 2017 Last revised: 11 Apr 2019
Date Written: March 28, 2019
The arguably most salient feature of the cross-section of stocks is being a daily winner or loser: these stocks are ranked in newspapers and other media, leading to attention spikes. We find that retail investor buying pressure surges for ranked stocks. Subsequently, these stocks underperform unranked stocks by 1.72% (1.60%) during the next month on an equally-weighted (value-weighted) basis. To show causality, we introduce a new return-convention based identification strategy. For unranked stocks, the idiosyncratic volatility puzzle and related anomalies (maximum daily returns, expected idiosyncratic skewness) disappear. Hence, ranking effects provide a simple unifying explanation for several asset pricing anomalies.
Keywords: Investor Attention, Stock Rankings, Retail Investors, Idiosyncratic Volatility Puzzle
JEL Classification: G11, G12, G14
Suggested Citation: Suggested Citation