Lottery-like preferences and the MAX effect in the cryptocurrency market

Abstract We investigate the significance of extreme positive returns in cross-sectional pricing cryptocurrencies. Through portfolio-level analyses and weekly regressions on all cryptocurrencies our sample period, we provide evidence for a statistically significant relationship between maximum daily return within previous month (MAX) expected In particular, univariate portfolio analysis shows that average raw risk-adjusted differences portfolios with highest lowest MAX deciles are 3.03% 1.99%, respectively. The results robust respect to size, price, momentum, short-term reversal, liquidity, volatility, skewness, investor sentiment.