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Dalian University of Technology, China
*Corresponding author:Shuai Qiao, Dalian University of Technology, No.2 Linggong Road, Ganjingzi District, Dalian City, Liaoning Province, PRC, China
Submission: October 10, 2024;Published: November 14, 2024
ISSN 2639-0612Volume5 Issue2
This paper examines the MAX anomaly, focusing on two key issues: (1) Whether MAX stocks, as lotterylike securities, can hedge against market volatility; and (2) How the 52-week high price, serving as a psychological barrier, influences investors’ gambling preferences. Our findings reveal that high-MAX stocks in the Chinese market fail to hedge market risk, suggesting that the MAX anomaly in China stems purely from gambling preferences. Furthermore, consistent with the psychological barrier hypothesis, we find that the MAX premium is negatively correlated with a stock’s proximity to its 52-week high. These results indicate that investors view the 52-week high as an upper price limit, and this psychological barrier significantly impacts their preference for lottery-like stocks.
JEL classification:G10 G11.
Keywords:MAX anomaly; Market volatility; Psychological barriers; 52-week high
Ph.D in Agriculture from Faculty of Agriculture, Tohoku University
Research Professor, PhD, Holistic Research Institute
Professor, Chief Doctor, Director of Department of Pediatric Surgery, Associate Director of Department of Surgery, Doctoral Supervisor Tongji hospital, Tongji medical college, Huazhong University of Science and Technology
Senior Research Engineer and Professor, Center for Refining and Petrochemicals, Research Institute, King Fahd University of Petroleum and Minerals (KFUPM), Dhahran, Saudi Arabia
Fellow of International Agency for Standards and Ratings (IASR), Edith Cowan University, Sarich Neuroscience Research Institute
Chancellor Emeritus / Professor Emeritus of Chemistry and Physics, University of Missouri–St. Louis
Ph.D in Science from the Federal University of Alagoas, UFAL, Brazil
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