In October 2021, Associate Professor Lin Chaonan, Department of Accounting/Accounting Development Research Center, Xiamen University, co-authored the paper "Time-dependent lottery preference and the cross-section of stock returns " with Professor Chen Hong-Yi, Chengchi University, Taiwan, Professor Ko Kuan Cheng, Jinan University, Taiwan, and Professor Yang Nien Tzu, Union University, Taiwan published in the Journal of Empirical Finance.

Abstract of the paper

Highlighting the importance of benchmark to identify lottery-like payoffs of stocks, this study proposes that investors’ lottery preference is formed toward tracking stocks’ performance over time. Accordingly, we develop a strategy based on time-dependent maximum daily return (denoted as TMAX) by buying (short selling) stocks with the most recent maximum daily returns (MAX) ranked in the bottom (top) decile of the historical distribution. The TMAX strategy generates significant premium that subsumes the profitability of Bali, Cakici, and Whitelaw’s (2011) MAX strategy, but not vice versa. A major advantage of the TMAX strategy is its time-invariant profitability across different periods and sentiment states. Further analyses show that the TMAX premium can be explained by shorting flow and behavioral theories, supporting the time-dependent feature of lottery preference.

Introduction of the author

Lin Chaonan, PhD, Associate Professor, Master Tutor. 1994-1998 Bachelor degree in Iron and Steel Metallurgy, Department of Metallurgy and Materials Engineering, Chongqing University; From 1998 to 2001, he graduated from the School of Economics and Business Administration of Chongqing University, majoring in Technical Economics and Management (direction of corporate Finance), and obtained a master's degree in management. From 2002 to 2007, he graduated from the School of Economics and Business Administration of Chongqing University, majoring in Technical Economics and Management (direction of Corporate Finance), and obtained a Doctor's degree in Management. From 1998 to 2007, he taught at the Accounting Department of the School of Economics and Business Administration, Chongqing University (from 2000 to 2001, he was seconded to the Planning Office of the Development Planning Department of the Ministry of Education for one year); Since September 2007, he has been teaching at the Department of Accounting, School of Management, Xiamen University, teaching courses such as "Accounting Information System" and "Advanced Financial Statement Analysis". He is mainly engaged in teaching and research in the fields of financial accounting, financial management and corporate governance. In Journal of Empirical Finance, Pacific Basin Finance Journal, Accounting and Finance, Finance Research More than 30 academic papers have been published in domestic and foreign journals such as Letters, Journal of Management Science, and Economic Science, and many monographs and textbooks have been published publicly. As the project leader, he presided over a number of projects of government and enterprises and institutions such as the Humanities and Social Science Fund of the Ministry of Education, Foshan Financial Bureau, Qingyuan Municipal Development and Reform Bureau and Guangdong Branch of China Development Bank. He has won the second prize of Chongqing Social Science Outstanding Achievements, the Deng Ziji Teaching Fund of Xiamen University, the China Construction Bank Teaching Fund of Xiamen University and other awards