TY - UNPB
T1 - Lottery Preference for Factor Investing in China's A-Share Market
AU - Wang, Liyao
PY - 2024/3/25
Y1 - 2024/3/25
N2 - Using a comprehensive factor zoo, we document a notable factor MAX premium in the Chinese market. Factors with high maximum daily returns consistently outperform those with low maximum returns by 0.82% per month in the future, on a risk-adjusted basis. This premium remains robust controlling for various factor characteristics, and is not sensitive to the selection of factors. The factor MAX anomaly stands apart from lottery-type stock anomalies and contributes to elucidate most of these anomalies. The factor MAX premium concentrates in high-eigenvalue principal component factors, shedding light on the prevalent lottery preferences for factor investing in China's A-share market. We find factor MAX anomaly also exists in the United States and other G7 countries.
AB - Using a comprehensive factor zoo, we document a notable factor MAX premium in the Chinese market. Factors with high maximum daily returns consistently outperform those with low maximum returns by 0.82% per month in the future, on a risk-adjusted basis. This premium remains robust controlling for various factor characteristics, and is not sensitive to the selection of factors. The factor MAX anomaly stands apart from lottery-type stock anomalies and contributes to elucidate most of these anomalies. The factor MAX premium concentrates in high-eigenvalue principal component factors, shedding light on the prevalent lottery preferences for factor investing in China's A-share market. We find factor MAX anomaly also exists in the United States and other G7 countries.
KW - Anomaly
KW - Factor investing
KW - Lottery preference
KW - Big data
UR - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4771500
U2 - 10.2139/ssrn.4771500
DO - 10.2139/ssrn.4771500
M3 - Working paper
BT - Lottery Preference for Factor Investing in China's A-Share Market
PB - SSRN
ER -