Litigation Risk and Stock Return Anomaly
用动态逻辑模型构建公司诉讼风险指标，发现低诉讼风险公司比高诉讼风险公司表现更好，年化超额收益超过8%，且该异常收益源于投资者对诉讼风险变化的反应不足。
We create a proxy for security litigation risk using a dynamic logistic model and find that low-litigation-risk firms outperform high-litigation-risk firms. The out-of-sample long-short portfolio delivers an annual alpha of over 8%. This anomalous return is mainly driven by long positions in low-litigation-risk firms. The results are not affected by the realization of the lawsuits and are robust after controlling for other well-known anomaly factors. We provide evidence that the litigation-risk anomalous return is driven by investors’ under-reaction to the changes in firms’ litigation risk.