ETF MAX and MIN effects

John Gould, Zhiyue Sun, Joey W. Yang

Research output: Contribution to journalArticlepeer-review

Abstract

In a sample of monthly ETFs from 2006 to 2022, we find evidence of return underreaction for extreme single-day low return (strong-MIN) events for ETFs as indicated by ongoing return underperformance in the subsequent month. This "MIN effect" result is consistent with: (i) ETF investors being hesitant to sell due to the disposition effect or being willing to buy due to anchoring bias and the illusion of a "cheap" market price during and following a strong-MIN event; and (ii) subsequent momentum drift driven by authorized participant arbitrage. We do not find robust evidence that strong-MAX events for ETFs are associated with predictable return performance in the subsequent month.
Original languageEnglish
Article number104835
Number of pages10
JournalFinance Research Letters
Volume60
Early online date15 Dec 2023
DOIs
Publication statusPublished - Feb 2024

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