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Author: Geert Bekaert
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 62
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Book Description
We examine aggregate idiosyncratic volatility in 23 developed equity markets, measured using various methodologies, and we find no evidence of upward trends. Instead, idiosyncratic volatility appears to be well described by a stationary autoregressive process that occasionally switches into a higher-variance regime that has relatively short duration. We also document that idiosyncratic volatility is highly correlated across countries. Finally, we examine the determinants of the time-variation in idiosyncratic volatility. In most specifications, the bulk of idiosyncratic volatility can be explained by a growth opportunity proxy, total (US) market volatility, and in most but not all specifications, the variance premium, a business cycle sensitive risk indicator. Our results have important implications for studies of portfolio diversification, return volatility and contagion.
Author: Geert Bekaert
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 62
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Book Description
We examine aggregate idiosyncratic volatility in 23 developed equity markets, measured using various methodologies, and we find no evidence of upward trends. Instead, idiosyncratic volatility appears to be well described by a stationary autoregressive process that occasionally switches into a higher-variance regime that has relatively short duration. We also document that idiosyncratic volatility is highly correlated across countries. Finally, we examine the determinants of the time-variation in idiosyncratic volatility. In most specifications, the bulk of idiosyncratic volatility can be explained by a growth opportunity proxy, total (US) market volatility, and in most but not all specifications, the variance premium, a business cycle sensitive risk indicator. Our results have important implications for studies of portfolio diversification, return volatility and contagion.
Author: René Garcia
Publisher:
ISBN:
Category : Business enterprises
Languages : en
Pages : 0
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Author: Alexander Barinov
Publisher:
ISBN:
Category : Business enterprises
Languages : en
Pages : 290
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Author: Kiseok Nam
Publisher:
ISBN:
Category :
Languages : en
Pages : 48
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Book Description
We suggest that price interaction among stocks is an important determinant of idiosyncratic volatility. We demonstrate that as more (less) stocks are listed in the markets, price interaction among stocks increases (decreases), and hence stocks, on average, become more (less) volatile. Our results show that price interaction has a significant positive effect of idiosyncratic volatility. The results of various robustness checks indicate that the effect of price interaction is still significant to the presence of liquidity, newly listed firms, cash flow variables, business cycle variables, and market volatility. Once the price interaction effect is taken into account, no trend remains in idiosyncratic volatility. We conclude that there is no trend, but a reflection of the positive effect of price interaction on idiosyncratic volatility.
Author: Hui Guo
Publisher:
ISBN:
Category : Stocks
Languages : en
Pages : 0
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Author: Turan G. Bali
Publisher:
ISBN:
Category :
Languages : en
Pages :
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This paper tests the empirical performance of a model-independent measure of aggregate idiosyncratic risk introduced by Bali and Cakici (2004) in ICAPM framework. The results indicate a significantly positive relation between the equal-weighted average stock volatility and the value-weighted portfolio returns on the NYSE/AMEX/Nasdaq stocks for the sample period of 1963:08-1999:12. We show that this result is driven by small stocks traded on the NASDAQ. In addition, the positive risk-return tradeoff does not exist for the extended sample of 1963:08-2004:12 and for portfolios of NYSE/AMEX and NYSE stocks. More importantly, we find almost no evidence of a significant link between the value-weighted portfolio returns and various measures of the value-weighted average idiosyncratic volatility.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 56
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Author: David A. Lesmond
Publisher:
ISBN:
Category :
Languages : en
Pages : 61
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This paper models a market microstructure bias, driven by the bid-ask spread, that is evident in the pricing of aggregate firm-level risk embodied by the stock return variance estimates of Goyal and Santa-Clara (2003). Controlling for this bias, we find no pricing ability for aggregate firm-level variance for the period 1927 to 2012 or for any sub-period tested. Market microstructure also explains the time-trend of aggregate firm-level volatility observed from 1962 to 1997 (Campbell, Lettau, Malkiel, and Xu, 2001), and subsumes any relation between retail trading and future idiosyncratic volatility from 1983 to 1999 (Brandt, Brav, Graham, and Kumar, 2010). We conclude that the aggregate firm-level bid-ask spread is priced with future market returns rather than any of the aggregate firm-level risk measures.
Author: Jungshik Hur
Publisher:
ISBN:
Category :
Languages : en
Pages : 39
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Book Description
We test the dynamic aspects of the loss aversion feature of Kahneman and Tversky (1979) and find that idiosyncratic volatility is negatively associated with unrealized gains of stock returns. Moreover, we show that this negative relationship is stronger for stocks with high individual investors' holdings. Finally, we show that controlling for firm age as defined by Fink et al (2010) eliminates the significance of retail trading proportions as a driver of idiosyncratic volatility. These findings are robust to price, sentiment, and IPO dates. Bivariate vector auto-regression (VAR) confirms the causality of unrealized gains of stock returns on idiosyncratic volatility.
Author: Junghoon Lee
Publisher:
ISBN:
Category :
Languages : en
Pages :
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