We investigate the significance of extreme positive returns in the cross-sectional pricing of cryptocurrencies. Through portfolio-level analyses and weekly cross-sectional regressions on all cryptocurrencies in our sample period, we provide evidence for a positive and statistically significant relationship between the maximum daily return within the previous month (MAX) and the expected returns on cryptocurrencies. In particular, the univariate portfolio analysis shows that weekly average raw and risk-adjusted return differences between portfolios of cryptocurrencies with the highest and lowest MAX deciles are 3.03% and 1.99%, respectively. The results are robust with respect to the differences in size, price, momentum, short-term reversal, liquidity, volatility, skewness, and investor sentiment.

Investors ex-ante price the tax shield that Turkish firms would enjoy and react positively to the introduction of a legislation that provides a deduction for new equity issues. Not all firms are equally affected by the equity tax shield. Cumulative abnormal returns prove significantly higher for levered firms who may find it easier to switch from debt to equity financing and for firms that have income to shield from tax. Furthermore, the most levered firms and the firms with the highest income, whom investors ex-ante expect to benefit most from the regulation, do indeed issue more equity to take advantage of the tax benefits of the new regulation.

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