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Florian Weigert
Former Member
Title
Prof. Dr.
Last Name
Weigert
First name
Florian
Phone
+41 71 224 7014
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PublicationCrash Aversion and the Cross-Section of Expected Stock Returns WorldwideThis 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.Type: journal articleJournal: The Review of Asset Pricing StudiesVolume: 6Issue: 1
Scopus© Citations 21 -
PublicationExtreme Downside Liquidity RiskWe merge the literature on downside return risk with that on systematic liquidity risk and introduce the concept of extreme downside liquidity (EDL) risk. We show that the cross-section of expected stock returns reflects a premium for EDL risk. Strong EDL risk stocks deliver a positive risk premium of more than 4% p.a. as compared to weak EDL risk stocks. The effect is more pronounced after the market crash of 1987. It is not driven by linear liquidity risk or by extreme downside return risk, and it cannot be explained by other firm characteristics or other systematic risk factors.