You are hereHome › College of Business (COB) › Department of Accounting and Finance › Krieger, Kevin › Predicting extreme returns and portfolio management implications Primary tabsView (active tab) RoMEO Style APAChicagoHarvardIEEEMLATurabian Choose the citation style. Krieger, K., Fodor, A., Mauck, N., & Stevenson, G. (2013). Predicting extreme returns and portfolio management implications. Journal of Financial Research, 36(4). doi:10.1111/jfir.12020 Download PDF Predicting extreme returns and portfolio management implications Details Type Academic Journal Article Title Predicting extreme returns and portfolio management implications Contributor(s) Krieger, Kevin (author)Fodor, Andy (author)Mauck, Nathan (author)Stevenson, Greg (author) Located In Journal of financial research ISSN 0270-2592 Volume 36 Issue 4 Date 2013 Notes JEL Codes: G10, G14, G17 DOI 10.1111/jfir.12020 Abstract We consider which readily observable characteristics of individual stocks may be used to forecast subsequent extreme price movements. We believe we are the first to explicitly consider the predictive influence of option implied volatility in such a framework, which we unsurprisingly find to be an important indicator. However, after controlling for implied volatility levels, other factors, particularly firm age and size, still have additional predictive power of extreme returns. Furthermore, excluding predicted extreme return stocks leads to a portfolio that has lower risk (standard deviation of returns and lower beta) without sacrificing performance.