Research and publications
Idiosyncratic Risk and the Cross-Section of Stock Returns
Idiosyncratic volatility has received considerable attention is the recent financial literature. Whether average idiosyncratic volatility has recently risen, whether it is a good predictor for aggregate market returns and whether it has a positive relationship with expected returns in the cross-section are still matters of active debate. We revisit these questions from a novel perspective, by taking the cross-sectional variance of stock returns as a measure of average idiosyncratic variance.
Author(s):
Rene Garcia, Daniel Mantilla-Garcia, Lionel Martellini
Summary:
Idiosyncratic volatility has received considerable attention is the recent financial literature. Whether average idiosyncratic volatility has recently risen, whether it is a good predictor for aggregate market returns and whether it has a positive relationship with expected returns in the cross-section are still matters of active debate. We revisit these questions from a novel perspective, by taking the cross-sectional variance of stock returns as a measure of average idiosyncratic variance.
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Register/Log in| Type : | Working paper |
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| Date : | 29/03/2011 |
| Keywords : |
Derivatives |
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