In this study, we investigate what drives the MAX effect in the South Korean stock market. We find that the MAX effect is significant only for overpriced stocks categorized by the composite mispricing index. Our results suggest that investors' demand for the lottery and the arbitrage risk effect...

This paper examines the dynamics between overnight noise traders and daytime arbitrageurs, measured by AB_NR from Akbas et al. (2022), which significantly differ in the predictability of future returns among the nearness to their 52-week high prices. If stocks are far below their 52-week highs,...

We study what drives the MAX effect from Bali et al. (2011) in the Korean stock market. The MAX effect is significant only among overpriced stocks, categorized by the composite mispricing index constructed by following the methodology of Stambaugh et al. (2015). We explain our results by...

This study investigates whether the MAX effect on the Korean stock market is more significant for overpriced stocks. Defining MAX as the maximum daily return for the previous month following Bali et al. (2011), we show that long low MAX and short high MAX strategies earn significantly positive...

This study investigates the empirical evidence of the salience effect provided by Cosemans and Frehen (2021). In this paper, we find that the salience effect is reference-dependent. Salience effect is strongly significant among stock groups with previous capital losses regardless of the...

Previous studies find that stocks with lottery features are overpriced. We show that anomalies induced by investors' lottery preferences exist primarily among stocks that are far from their 52-week high prices. The results suggest that if stocks are near their 52-week highs, investors no longer...