Crash Aversion and the Cross-Section of Expected Stock Returns Worldwide

Item Type Journal paper
Abstract

This 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.

Authors Weigert, Florian
Journal or Publication Title The Review of Asset Pricing Studies
Language English
Keywords Asset Pricing, Crash Aversion, International Finance, Tail Risk
Subjects business studies
Institute/School s/bf - Swiss Institute of Banking and Finance
HSG Classification contribution to scientific community
Refereed Yes
Date 2016
Publisher Oxford Univ. Press
Place of Publication Cary, NC
Volume 6
Number 1
Page Range 135-178
ISSN 2045-9920
ISSN-Digital 2045-9939
Publisher DOI 10.1093/rapstu/rav019
Depositing User Prof. Dr. Florian Weigert
Date Deposited 11 Feb 2014 13:40
Last Modified 23 Aug 2016 11:18
URI: https://www.alexandria.unisg.ch/publications/229256

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Citation

Weigert, Florian (2016) Crash Aversion and the Cross-Section of Expected Stock Returns Worldwide. The Review of Asset Pricing Studies, 6 (1). 135-178. ISSN 2045-9920

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https://www.alexandria.unisg.ch/id/eprint/229256
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