Strategies · Core
MAX Effect / Lottery Stocks
Short last-month’s extreme daily winners (lottery names) and long the boring residual — Bali–Cakici–Whitelaw MAX.
Definition
MAX = the stock’s highest daily return last month. Long low-MAX, short high-MAX. The story is lottery demand: investors overpay for jackpot-like names. Overlaps IVOL and skew.
Why it matters
It is a clean behavioral sort. Crowded, expensive to short, and messy in a melt-up of high-MAX names that keep winning.
Case
A meme month where MAX names keep printing +20% days. The short is the strategy and the pain.
How to read it
Overlap with IVOL and short interest. If you already short high IVOL, MAX may be the same book.
Key papers
Landmark references with real publisher or arXiv links — not token-overlap noise.
- Maxing Out: Stocks as LotteriesBali, Cakici, Whitelaw · 2011 · Journal of Financial EconomicsThe MAX effect.
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