The Review of Asset Pricing Studies Vol. 6 No. 1 2016
Crash Aversion and the Cross-Section of Expected Stock Returns Worldwide
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.
- DOI
- 10.1093/rapstu/rav019
- Volume
- 6
- Issue
- 1
- Pages
- 135-178
- Language
- en
- Sources
- crossref bibtex:phds-export.bib openalex