When is a MAX not the MAX? How news resolves information uncertainty

Ran Tao, Chris Brooks*, Adrian R. Bell

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)


A well-known asset pricing anomaly, the “MAX” effect, measured by the maximum daily return in the past month, depicts stocks’ lottery-like features and investor gambling behaviour. Using the comprehensive stock-level Dow Jones (DJNS) news database between 1979 and 2016, we consider in a empirical setting how the presence of news reports affects these lottery-type stocks. We find an augmented negative relationship between MAX stocks without news and expected returns, whereby MAX with news coverage generates return momentum. The differing future return relationships between MAX stocks with and without news appears to be best explained by information uncertainty mitigation upon news arrival. Overall, our findings suggest that news plays a role in resolving information uncertainty in the stock market.

Original languageEnglish
Pages (from-to)33-51
Number of pages19
JournalJournal of Empirical Finance
Early online date03 Apr 2020
Publication statusPublished - Jun 2020
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2020

Copyright 2020 Elsevier B.V., All rights reserved.


  • Information uncertainty
  • Investor sentiment
  • Lottery-like stocks
  • MAX
  • News coverage
  • Stock return predictability

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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