![]() ![]() The anomaly is explained by limits to arbitrage (investors who would buy a stock they see as overpriced are reluctant, due to the risk of unlimited losses, or unable to short a stock they see as overpriced). Instead, the market seemingly under-reacts to IMIN, incorporating information into prices more slowly than we would expect in an efficient market.” These findings are counterintuitive to the literature on lottery preferences. Their findings led the authors to conclude that “investors pay a premium for lottery stocks but don’t appear to discount hazard stocks. In this setting hazard stocks did earn a premium in future returns - investors price lottery and hazard stocks consistently.
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