Investor Risk Appetite and High-Beta Stock Valuation Around Macroeconomic Announcements

55 Pages Posted: 25 Jan 2024

See all articles by Jingjing Chen

Jingjing Chen

Portland State University - School of Business Administration

George J. Jiang

Washington State University

Multiple version iconThere are 2 versions of this paper

Abstract

We document a dramatic swing of high-beta stock returns around pre-scheduled macroeconomic announcements – from being negative on the day before, to positive on the day of, and negative again on the day after announcements. A feasible long-short strategy of betting against beta and betting on beta yields annualized 25.28% cumulative return over the three-day announcement window. Trading activities suggest that some (institutional) investors actively trade high-beta stocks to adjust risk exposure around the announcement. Options trading shows corroborating evidence that investors are averse to risk on days before and after announcements but willing to take risk on announcement days.

Keywords: Macroeconomic announcements, High-beta stock returns, Beta premium, Market return, Investor risk appetite

Suggested Citation

Chen, Jingjing and Jiang, George, Investor Risk Appetite and High-Beta Stock Valuation Around Macroeconomic Announcements. Available at SSRN: https://ssrn.com/abstract=4706283 or http://dx.doi.org/10.2139/ssrn.4706283

Jingjing Chen

Portland State University - School of Business Administration ( email )

Portland, OR 97207-0751
United States

George Jiang (Contact Author)

Washington State University ( email )

Department of Finance and Management Science
Carson College of Business
Pullman, WA 99-4746164
United States
509-3354474 (Phone)

HOME PAGE: http://directory.business.wsu.edu/bio.html?username=george.jiang

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