“The Higher They Fly, The Harder They Fall” by Jialin Yu
Stocks with better past returns crash more than other stocks during the flash crash on May 6, 2010. I find evidence that this is related to such stocks being unattractive to contrarian buyers. Stocks with better past returns exhibit more negative co-skewness, which holds in almost every month since the 1960s and for past return horizons ranging from one month to three years. This has interesting implications for risk premia associated with short-term reversal, medium-term momentum, and long-run reversal portfolios.