The MAX effect in an oil exporting country: The case of Norway

Artikel

This paper assesses the effects of investors' lottery-seeking behavior on expected returns in the Norwegian equity market, a relatively small equity market dominated by the energy industry. We use the MAX factor defined as maximum daily return over the previous month as the proxy of investors' preference for lottery-like stocks. Despite evidence from recent literature that MAX has a negative relationship with the expected returns in other developed European markets, we find that the relationship is generally insignificant in Norway; however, it becomes more nuanced when we control for the state of the oil market. The dominance of firms related to the oil industry, which have experienced tremendous growth over the last couple of decades, masks the effect to a large extent. Conditional regressions show that the MAX effect is only significant in the Norwegian stock market when the oil market is in the bearish state.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Journal of Risk and Financial Management ; ISSN: 1911-8074 ; Volume: 15 ; Year: 2022 ; Issue: 4 ; Pages: 1-16 ; Basel: MDPI

Classification and Topics

• Classification: Wirtschaft
• Subject: the MAX effect ; oil market ; lottery preference ; market states ; investor sentiment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kashif, Muhammad ; Leirvik, Thomas
• Event: Veröffentlichung
• (who): MDPI
• (where): Basel
• (when): 2022

Further information

• DOI: doi:10.3390/jrfm15040154
• Handle: http://hdl.handle.net/10419/258877
• Last update: 10.03.2025, 11:41 AM CET