Idiosyncratic Return Volatility In The Cross Section Of Stocks
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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.
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.
The Negative Relationship Between The Cross Section Of Expected Returns And Lagged Idiosyncratic Volatility The German Stock Market 1990 2016
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Author : Lasse Homann
language : en
Publisher: GRIN Verlag
Release Date : 2020-04-23
The Negative Relationship Between The Cross Section Of Expected Returns And Lagged Idiosyncratic Volatility The German Stock Market 1990 2016 written by Lasse Homann and has been published by GRIN Verlag this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-04-23 with Business & Economics categories.
Master's Thesis from the year 2018 in the subject Business economics - Review of Business Studies, grade: 1.0, University of Hannover (Institute of Financial Markets), language: English, abstract: The main goal of this thesis is to examine whether the negative relationship between the cross-section of expected returns and lagged idiosyncratic volatility also can be found for the German stock market for the period of January 1990 through June 2016, by sorting stocks into portfolios on the basis of their idiosyncratic volatility estimates. This procedure follows Ang et al. (2006). Similar to the findings of Ang et al. (2006) for the US stock market this paper shows that there is a significant difference in returns relative to the Fama-French three-factor model, between portfolios of stocks with high and portfolios of stocks with low past idiosyncratic volatility. Although for the period 1990 - 2016 no relationship between lagged idiosyncratic volatility and the cross-section of stock returns has been found, the Idiosyncratic Volatility Puzzle reveals itself for the sub-period 2003 - 2016, when the respective portfolios of stocks with different levels of idiosyncratic volatility are controlled for size.
Idiosyncratic Volatility And Cross Section Of Stock Returns
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Author : Prashant Sharma
language : en
Publisher:
Release Date : 2016
Idiosyncratic Volatility And Cross Section Of Stock Returns written by Prashant Sharma 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.
The present study examines the cross-sectional pricing ability of idiosyncratic volatility (IV) in Indian stock market and investigates the relationship amongst expected idiosyncratic volatility (EI), unexpected idiosyncratic volatility (UI), and cross-section of stocks returns. The study uses ARIMA (2, 0, 1) model to IV into EI and UI. The stocks returns are regressed on IV, EI and UI using Newey-West (1987) corrections, in order to investigate their empirical relationship. The study finds that IV is positively related with stock returns. Further the IV significantly explains the cross-section of stock returns in Indian context. After imposing control over UI, as it is highly correlated with unexpected returns, the inter-temporal relationship between EI and expected returns turns out to be positive.
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.
Earnings Announcement Idiosyncratic Volatility And The Cross Section Of Stock Returns
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Author : Cameron Truong
language : en
Publisher:
Release Date : 2015
Earnings Announcement Idiosyncratic Volatility And The Cross Section Of Stock Returns written by Cameron Truong and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
We document a significant positive relation between earnings announcement idiosyncratic volatility and stock returns in the 10-day window before future earnings announcements. The average of risk-adjusted return differences between stocks with the highest earnings announcement idiosyncratic volatility and stocks with the lowest earnings announcement idiosyncratic volatility exceeds 100 basis points in the 10 days leading up to the earnings announcements. The pricing of earnings announcement idiosyncratic volatility is asymmetric where only idiosyncratic volatility based on positive stock returns is priced. This is consistent with the argument that investors have a preference for stocks with large payoffs during earnings announcements.
The Cross Section Of Expected Stock Returns And Components Of Idiosyncratic Volatility
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Author : Seyed Reza Tabatabaei Poudeh
language : en
Publisher:
Release Date : 2021
The Cross Section Of Expected Stock Returns And Components Of Idiosyncratic Volatility written by Seyed Reza Tabatabaei Poudeh and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
We examine the relationship between stock returns and components of idiosyncratic volatility-two volatility and two covariance terms- derived from the decomposition of stock returns variance. The portfolio analysis result shows that volatility terms are negatively related to expected stock returns. On the contrary, covariance terms have positive relationships with expected stock returns at the portfolio level. These relationships are robust to controlling for risk factors such as size, book-to-market ratio, momentum, volume, and turnover. Furthermore, the results of Fama-MacBeth cross-sectional regression show that only alpha risk can explain variations in stock returns at the firm level. Another finding is that when volatility and covariance terms are excluded from idiosyncratic volatility, the relation between idiosyncratic volatility and stock returns becomes weak at the portfolio level and disappears at the firm level.
The Information Content In Implied Idiosyncratic Volatility And The Cross Section Of Stock Returns
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Author : Dean Diavatopoulos
language : en
Publisher:
Release Date : 2014
The Information Content In Implied Idiosyncratic Volatility And The Cross Section Of Stock Returns written by Dean Diavatopoulos and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
Current literature is inconclusive as to whether idiosyncratic risk influences future stock returns and the direction of the impact. Prior studies are based on historical realized volatility. Implied volatilities from option prices represent the market's assessment of future risk and are likely a superior measure to historical realized volatility. We use implied idiosyncratic volatilities on firms with traded options to examine the relation between idiosyncratic volatility and future returns. We find a strong positive link between implied idiosyncratic risk and future returns. After considering the impact of implied idiosyncratic volatility, historical realized idiosyncratic volatility is unimportant. This performance is strongly tied to small size and high book-to-market equity firms.
The Cross Section Of Stock Return And Volatility
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Author :
language : en
Publisher:
Release Date : 2001
The Cross Section Of Stock Return And Volatility written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with categories.
There has been increasing research on the cross-sectional relation between stock return and volatility. Conclusions are, however, mixed, partially because volatility or variance is modeled or parameterized in various ways. This paper, by using the Jiang and Tian (2005)'s model-free method, estimates daily option implied volatility for all US individual stocks from 1996:01 to 2006:04, and then employs this information to extract monthly volatilities and their idiosyncratic parts for cross-sectional regression analyses. We follow the Fama and French (1992) cross-sectional regression procedure and show that each of the 4 monthly measures of change of total volatility, total volatility, expected idiosyncratic variance, and expected idiosyncratic volatility is a negative priced factor in the cross-sectional variation of stock returns. We also show that the negative correlation between return and total volatility or expected idiosyncratic variance or expected idiosyncratic volatility strengthens as leverage increases or credit rating worsens. However, leverage does not play a role in the relation between return and change of total volatility. Finally, responding to recent papers, we show that the investor sentiment does not have a significant impact on the cross- sectional relation between return and volatility.
Empirical Asset Pricing
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Author : Turan G. Bali
language : en
Publisher: John Wiley & Sons
Release Date : 2016-02-26
Empirical Asset Pricing written by Turan G. Bali and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-02-26 with Business & Economics categories.
“Bali, Engle, and Murray have produced a highly accessible introduction to the techniques and evidence of modern empirical asset pricing. This book should be read and absorbed by every serious student of the field, academic and professional.” Eugene Fama, Robert R. McCormick Distinguished Service Professor of Finance, University of Chicago and 2013 Nobel Laureate in Economic Sciences “The empirical analysis of the cross-section of stock returns is a monumental achievement of half a century of finance research. Both the established facts and the methods used to discover them have subtle complexities that can mislead casual observers and novice researchers. Bali, Engle, and Murray’s clear and careful guide to these issues provides a firm foundation for future discoveries.” John Campbell, Morton L. and Carole S. Olshan Professor of Economics, Harvard University “Bali, Engle, and Murray provide clear and accessible descriptions of many of the most important empirical techniques and results in asset pricing.” Kenneth R. French, Roth Family Distinguished Professor of Finance, Tuck School of Business, Dartmouth College “This exciting new book presents a thorough review of what we know about the cross-section of stock returns. Given its comprehensive nature, systematic approach, and easy-to-understand language, the book is a valuable resource for any introductory PhD class in empirical asset pricing.” Lubos Pastor, Charles P. McQuaid Professor of Finance, University of Chicago Empirical Asset Pricing: The Cross Section of Stock Returns is a comprehensive overview of the most important findings of empirical asset pricing research. The book begins with thorough expositions of the most prevalent econometric techniques with in-depth discussions of the implementation and interpretation of results illustrated through detailed examples. The second half of the book applies these techniques to demonstrate the most salient patterns observed in stock returns. The phenomena documented form the basis for a range of investment strategies as well as the foundations of contemporary empirical asset pricing research. Empirical Asset Pricing: The Cross Section of Stock Returns also includes: Discussions on the driving forces behind the patterns observed in the stock market An extensive set of results that serve as a reference for practitioners and academics alike Numerous references to both contemporary and foundational research articles Empirical Asset Pricing: The Cross Section of Stock Returns is an ideal textbook for graduate-level courses in asset pricing and portfolio management. The book is also an indispensable reference for researchers and practitioners in finance and economics. Turan G. Bali, PhD, is the Robert Parker Chair Professor of Finance in the McDonough School of Business at Georgetown University. The recipient of the 2014 Jack Treynor prize, he is the coauthor of Mathematical Methods for Finance: Tools for Asset and Risk Management, also published by Wiley. Robert F. Engle, PhD, is the Michael Armellino Professor of Finance in the Stern School of Business at New York University. He is the 2003 Nobel Laureate in Economic Sciences, Director of the New York University Stern Volatility Institute, and co-founding President of the Society for Financial Econometrics. Scott Murray, PhD, is an Assistant Professor in the Department of Finance in the J. Mack Robinson College of Business at Georgia State University. He is the recipient of the 2014 Jack Treynor prize.