| Summary: | 碩士 === 國立中山大學 === 財務管理學系研究所 === 106 === Baker et al. (2011) show the stocks with high volatility have lower return than the stocks with low volatility, and the negative correlation between risk and return is called “low-volatility anomaly”. Behavioral finance scholars point out that one of the reasons for the low-volatility anomaly is investors prefer lottery-type stock. Rational investors form low-volatility strategies by buying lower-volatility stocks and selling higher-volatility stocks. However, there is no related literatures to discuss the relationship between advertising and low-volatility strategies.
This research indicates the influence of advertising on the low-volatility strategies, and the influence of optimism/pessimism on the low-volatility strategies. The results of this study are as follows:
1. Return on low-volatility strategies with high advertising exposure portfolios are significantly higher than return on low advertising exposure portfolios. The stocks with high advertising exposure capture the attention from individual investors. In high-volatility portfolios, compared with the stocks which are low advertising exposure, the stocks with high advertising exposure can make investors who prefer stocks with lottery-type pay more attention on it. Investor''s demand for high-advertising stocks has increased greatly, making stock prices overreact. In addition, there is a short-sale constraint in the market and it is not possible to correct the price immediately. Consequently, it makes the low-volatility anomaly stronger, and the low-volatility strategy profitable.
2. Return on low-volatility strategy with high advertising exposure portfolio is higher in optimistic sentiment than in pessimism sentiment. In optimistic sentiment of high advertising portfolio, for the high-volatility portfolio, investors with high sentiment make good news transfer quickly. Investors purchase many high-volatility stocks and price of stocks with high-volatility will fall in the next period.
3. Investor sentiment has a significant positive predictive ability for low-volatility strategies profit from high advertising portfolios. The more optimistic the sentiment of investor is, the more incentive for them to gamble. Investors buy a lot of lottery-type stocks and lead to overreaction of price with lottery-type stocks. In general, investors with optimistic sentiment make more profitable in low-volatility strategy.
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