Asset Pricing in the Dark: The Cross Section of OTC Stocks

Andrew Ang (), Assaf A. Shtauber and Paul C. Tetlock

No 19309, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Over-the-counter (OTC) stocks are far less liquid, disclose less information, and exhibit lower institutional holdings than listed stocks. We exploit these different market conditions to test theories of cross-sectional return premiums. Compared to premiums in listed markets, the OTC illiquidity premium is several times higher, the size, value, and volatility premiums are similar, and the momentum premium is three times lower. The OTC illiquidity, size, value, and volatility premiums are largest among stocks held predominantly by retail investors and those not disclosing financial information. Theories of differences in investors' opinions and limits on short sales help explain these return premiums.

JEL-codes: G10 G12 G14 G20 (search for similar items in EconPapers)
Date: 2013-08
Note: AP
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Citations: View citations in EconPapers (39)

Published as Andrew Ang & Assaf A. Shtauber & Paul C. Tetlock, 2013. "Asset Pricing in the Dark: The Cross-Section of OTC Stocks," Review of Financial Studies, Society for Financial Studies, vol. 26(12), pages 2985-3028.

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