Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
8954571 | Finance Research Letters | 2018 | 20 Pages |
Abstract
Bali et al. (2011) first find and investigate the MAX effect using raw returns (calculated by recorded closing prices), which include microstructure noise from bid-ask measurement errors. Motivated by this, we use noise-adjusted returns (which remove bid-ask errors) to examine the MAX effect and find microstructure noise is an important source of the effect. Average monthly return and five-factor alpha differences between the highest and lowest MAX stock portfolios are not significant in statistics. Most importantly, the negative five-factor alpha differences have no negative significance both in economics and statistics over equal-weighted portfolios.
Related Topics
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Authors
Xindong Zhang, Lixu Xie, Yue Zhai, Dong Wang,