An article titled "Left-Tail Momentum: Underreaction to Bad News, Costly Arbitrage and Equity Returns" coauthored by Sabancı Üniversitesi School of Management Faculty Members Yiğit Atılgan, Özgür Demirtaş, A. Doruk Günaydın and Georgetown University – Robert Emmett McDonough School of Business Faculty Member Turan G. Bali has been accepted to Journal of Financial Economics Magazine and will be published soon.
This article documents a cross-sectional negative relation between downside risk metrics such as value-at-risk and future equity returns for stocks traded in the U.S. and other international markets. The study provides a behavioral explanation for this anomaly and shows that retail investors underestimate the persistence of downside risk and overprice securities that have experienced large recent losses. Thus, the prices of stocks that are located in the left-tail of the return distribution continue to fall in the future resulting in a phenomenon that we term as left-tail momentum.
Journal of Financial Economics Magazine
Journal of Financial Economics is an elite academic journal in the field of finance and economics. It is one of the 50 journals that are used to calculate Financial Times rankings in the field of management. Many Nobel Economics Prize winners have contributed and continue to contribute to the journal.