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- Publisher
- Oxford University Press
- Copyright
- © The Author 2015. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oup.com
- ISSN
- 2045-9920
- eISSN
- 2045-9939
- DOI
- 10.1093/rapstu/rav019
- Publisher site
- See Article on Publisher Site
Abstract
AbstractThis paper examines whether investors receive compensation for holding stocks with a strong sensitivity to extreme market downturns in a sample covering forty countries. Worldwide, stocks with strong crash sensitivity deliver average returns of more than 7% p.a. higher than stocks with weak crash sensitivity. The effect is robust across geographical subsamples and is not explained by systematic risk factors and alternative firm characteristics. I show that the risk premium is particularly pronounced in countries that display negative market skewness, high income per capita, and rank high on Hofstede’s individualism index.Received July 2, 2015; accepted November 20, 2015 by Editor Raman Uppal.
Journal
The Review of Asset Pricing Studies – Oxford University Press
Published: Jun 1, 2016