Anchoring Bias Idiosyncratic Volatility And The Cross Section Of Stock Returns
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Anchoring Bias Idiosyncratic Volatility And The Cross Section Of Stock Returns
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Author : Cedric T. Luma Mbanga
language : en
Publisher:
Release Date : 2015
Anchoring Bias Idiosyncratic Volatility And The Cross Section Of Stock Returns written by Cedric T. Luma Mbanga and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with Stocks categories.
Idiosyncratic Return Volatility In The Cross Section Of Stocks
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Author : Namho Kang
language : en
Publisher:
Release Date : 2011
Idiosyncratic Return Volatility In The Cross Section Of Stocks written by Namho Kang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Stocks categories.
This paper uncovers the changes in the cross-sectional distribution of idiosyncratic volatility of stocks over the period 1963--2008. The contribution of the top decile to the total market idiosyncratic volatility increased, while the contribution of the bottom decile decreased. We introduce a simple theoretical model showing that larger capital of Long/Short-Equity funds further exacerbates large idiosyncratic shocks but attenuates small idiosyncratic shocks. This effect is stronger for more illiquid stocks. Time-series and cross-sectional results are consistent with the predictions of the model. The results are robust to industry affiliation, stock liquidity, firm size, firm leverage, as well as sign of price change. These findings highlight the roll of hedge funds and other institutional investors in explaining the dynamics of extreme realizations in the cross-section of returns.
Idiosyncratic Volatility And The Cross Section Of Expected Returns
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Author : Turan G. Bali
language : en
Publisher:
Release Date : 2012
Idiosyncratic Volatility And The Cross Section Of Expected Returns written by Turan G. Bali and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
This paper examines the cross-sectional relation between idiosyncratic volatility and expected stock returns. The results indicate that (i) data frequency used to estimate idiosyncratic volatility, (ii) weighting scheme used to compute average portfolio returns, (iii) breakpoints utilized to sort stocks into quintile portfolios, and (iv) using a screen for size, price and liquidity play a critical role in determining the existence and significance of a relation between idiosyncratic risk and the cross-section of expected returns. Portfolio-level analyses based on two different measures of idiosyncratic volatility (estimated using daily and monthly data), three weighting schemes (value-weighted, equal-weighted, inverse-volatility-weighted), three breakpoints (CRSP, NYSE, equal-market-share), and two different samples (NYSE/AMEX/NASDAQ and NYSE) indicate that there is no robust, significant relation between idiosyncratic volatility and expected returns.
Volatility And The Cross Section Of Equity Returns
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Author : Ruslan Goyenko
language : en
Publisher:
Release Date : 2020
Volatility And The Cross Section Of Equity Returns written by Ruslan Goyenko and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
A number of papers document a strong negative relation between idiosyncratic volatility and risk-adjusted stock returns. Using IHS Markit data on indicative borrowing fees, we show that stocks with high idiosyncratic volatility are far more likely to be hard-to-borrow than stocks with low idiosyncratic volatility. When hard-to-borrow stocks are excluded, the relation between idiosyncratic volatility and stock returns disappears. The relation between idiosyncratic volatility and stocks returns is more accurately described as a relation between being hard-to-borrow and stock returns.
Idiosyncratic Risk And The Cross Section Of Stock Returns
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Author : Stanislav Bozhkov
language : en
Publisher:
Release Date : 2017
Idiosyncratic Risk And The Cross Section Of Stock Returns written by Stanislav Bozhkov and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
The Cross Section Of Volatility And Expected Returns
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Author : Andrew Ang
language : en
Publisher:
Release Date : 2004
The Cross Section Of Volatility And Expected Returns written by Andrew Ang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Stocks categories.
"We examine the pricing of aggregate volatility risk in the cross-section of stock returns. Consistent with theory, we find that stocks with high sensitivities to innovations in aggregate volatility have low average returns. In addition, we find that stocks with high idiosyncratic volatility relative to the Fama and French (1993) model have abysmally low average returns. This phenomenon cannot be explained by exposure to aggregate volatility risk. Size, book-to-market, momentum, and liquidity effects cannot account for either the low average returns earned by stocks with high exposure to systematic volatility risk or for the low average returns of stocks with high idiosyncratic volatility"--National Bureau of Economic Research web site.
Idiosyncratic Volatility Its Expected Variation And The Cross Section Of Stock Returns
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Author : Nicole Branger
language : en
Publisher:
Release Date : 2019
Idiosyncratic Volatility Its Expected Variation And The Cross Section Of Stock Returns written by Nicole Branger and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
We show that the widely documented negative relation between idiosyncratic volatility (IVOL) and expected returns can be explained by the mean reversion of stocks' idiosyncratic volatilities. We use option-implied information to extract the mean reversion speed of IVOL in an almost model-free fashion. This allows us to identify stocks for which past IVOL is a bad proxy for expected IVOL. These stocks solely drive the negative relation, and a long--short portfolio earns a monthly risk-adjusted return of 2.74%, on average. In a horse race, the mean reversion speed is superior to prominent competing explanations of the IVOL puzzle.
Unusual News Flow And The Cross Section Of Stock Returns
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Author : Turan G. Bali
language : en
Publisher:
Release Date : 2016
Unusual News Flow And The Cross Section Of Stock Returns written by Turan G. Bali and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
We document that stocks that experience sudden increases in idiosyncratic volatility underperform otherwise similar stocks in the future, and we propose that this phenomenon can be explained by the Miller (1977) conjecture. We show that volatility shocks can be traced to the unusual firm-level news flow, which temporarily increases the level of investor disagreement about the firm value. At the same time, volatility shocks pose a barrier to short selling, preventing pessimistic investors from expressing their views. In the presence of divergent opinions and short selling constraints, prices end up initially reflecting optimistic views but adjust down in the future as investors' opinions converge.
Idiosyncratic Volatility Aggregate Volatility Risk And The Cross Section Of Returns
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Author : Alexander Barinov
language : en
Publisher:
Release Date : 2008
Idiosyncratic Volatility Aggregate Volatility Risk And The Cross Section Of Returns written by Alexander Barinov and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with Business enterprises categories.
Idiosyncratic Volatility And The Cross Section Of Anomaly Returns
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Author : Adam Zaremba
language : en
Publisher:
Release Date : 2018
Idiosyncratic Volatility And The Cross Section Of Anomaly Returns written by Adam Zaremba and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
Due to arbitrage risk asymmetries, the relationship between idiosyncratic risk and expected returns is positive (negative) among overpriced (underpriced) stocks. We offer a new active anomaly-selection strategy that capitalizes on this effect. To this end, we consider eleven equity anomalies in the U.S. market for years 1963-2016. Buying (selling) long (short) legs of the anomaly portfolios with the highest idiosyncratic volatility produces monthly abnormal returns ranging from 0.97% to 1.14% per month, outperforming a naive benchmark that equally weights all the anomalies by 45-70%. The effect cannot be subsumed by any other established anomaly-return predictor, like momentum or seasonality. The results are robust to many considerations, including different numbers of anomalies in the portfolios, subperiod analysis, as well as estimation of idiosyncratic risk from the alternative models and throughout different periods.