Predictability of Extreme Returns in the Turkish Stock Market

Abstract

<p>In this paper, we show that extreme returns can predict future returns in the Turkish<br />stock market. We find that extreme return (high MAX) generating stocks show a<br />lower performance in the next month in this market. More explicitly, there is a<br />strong negative relationship between the firm’s maximum (MAX) daily returns<br />over the previous month and its succeeding stock returns. Our results are robust in<br />both firm-level cross-sectional, and portfolio-level analysis. <br /></p>