Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/258877 
Year of Publication: 
2022
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 15 [Issue:] 4 [Article No.:] 154 [Publisher:] MDPI [Place:] Basel [Year:] 2022 [Pages:] 1-16
Publisher: 
MDPI, Basel
Abstract: 
This paper assesses the effects of investors' lottery-seeking behavior on expected returns in the Norwegian equity market, a relatively small equity market dominated by the energy industry. We use the MAX factor defined as maximum daily return over the previous month as the proxy of investors' preference for lottery-like stocks. Despite evidence from recent literature that MAX has a negative relationship with the expected returns in other developed European markets, we find that the relationship is generally insignificant in Norway; however, it becomes more nuanced when we control for the state of the oil market. The dominance of firms related to the oil industry, which have experienced tremendous growth over the last couple of decades, masks the effect to a large extent. Conditional regressions show that the MAX effect is only significant in the Norwegian stock market when the oil market is in the bearish state.
Subjects: 
the MAX effect
oil market
lottery preference
market states
investor sentiment
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article

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