Maxing Out in China: Optimism or Attention?

International Review of Finance, Forthcoming

Posted: 17 May 2018

See all articles by Muhammad A. Cheema

Muhammad A. Cheema

University of Otago New Zealand

Gilbert Nartea

University of Canterbury - College of Business and Law

Yimei Man

University of Waikato, Management School

Multiple version iconThere are 2 versions of this paper

Date Written: May 11, 2018

Abstract

Bali, Cakici, and Whitelaw (2011) document a MAX premium in the U.S. where stocks with the highest maximum daily returns (MAX) underperform stocks with the lowest MAX in the subsequent month. However, the source of this MAX premium is contentious. Fong and Toh (2014) find that the MAX premium exclusively follows high sentiment periods suggesting that it is driven by investor optimism during high sentiment periods. In contrast Cheon and Lee (2017) find that the MAX premium is stronger following low sentiment periods suggesting that it is driven by the attention-grabbing characteristic of high MAX stocks in low sentiment periods. We present evidence from China consistent with the MAX premium being driven by investor optimism during high sentiment periods.

Keywords: MAX Premium, China, Attention-Grabbing, Investor Optimism

JEL Classification: G11, G12, G14

Suggested Citation

Cheema, Muhammad A. and Nartea, Gilbert and Man, Yimei, Maxing Out in China: Optimism or Attention? (May 11, 2018). International Review of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3176864

Muhammad A. Cheema (Contact Author)

University of Otago New Zealand ( email )

Dunedin, 9016
New Zealand

Gilbert Nartea

University of Canterbury - College of Business and Law ( email )

Christchurch, 8140
New Zealand

Yimei Man

University of Waikato, Management School ( email )

Hamilton
New Zealand

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