Risk-Premium#40tier 1live in production
max drawdown premium
cadence: Annualdata: lowlong only
RFS
2020
Review of Financial Studies
#40 max_drawdown_premium — Atilgan-Bali-Demirtas-Gunaydin 2020.
Citation only — paper link pending.
Mechanism
Stocks with the worst trailing left-tail outcomes (deepest 1y max drawdown, fattest CVaR(5%)) earn HIGHER subsequent returns — risk compensation for crash exposure. Standard finance ("low-risk anomaly") would predict the opposite; this is one of the few risk factors that actually points the textbook
Data dependencies
daily_pricesAdjusted-close OHLCV for every US-listed ticker; primary price feed.
Expected edge
Status: contested in pure form (overlaps with distress / O-score) — once you control for default-risk proxies, the residual sleeve is ~2-3% annualized but stable.
Illustrative pattern only
NOT a backtestIllustrative pattern only — see /app for live backtests and the actual current equity curve.
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