Extreme returns and the investor’s expectation for future volatility: Evidence from the Finnish stock market

Abstract We examine the significance of extreme positive returns of the previous month (MAX) as a return predictor in the Finnish stock market. We show that high fear months, i.e., months associated with the investor’s high expectation for future volatility, are accompanying with low MAX effect implying that investors reluctant to gamble in high MAX stocks when they have high expectation for future volatility.