Download or read book Anchoring Bias Idiosyncratic Volatility and the Cross section of Stock Returns written by Cedric T. Luma Mbanga and published by . This book was released on 2015 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Idiosyncratic Return Volatility in the Cross section of Stocks written by Namho Kang and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Idiosyncratic Volatility and the Cross Section of Expected Returns written by Turan G. Bali and published by . This book was released on 2012 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Volatility and the Cross Section of Equity Returns written by Ruslan Goyenko and published by . This book was released on 2020 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Idiosyncratic Risk and the Cross Section of Stock Returns written by Stanislav Bozhkov and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Unusual News Flow and the Cross Section of Stock Returns written by Turan G. Bali and published by . This book was released on 2016 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Idiosyncratic Volatility Aggregate Volatility Risk and the Cross section of Returns written by Alexander Barinov and published by . This book was released on 2008 with total page 290 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Cross section of Volatility and Expected Returns written by Andrew Ang and published by . This book was released on 2004 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: "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.
Download or read book Idiosyncratic Volatility and the Cross Section of Anomaly Returns written by Adam Zaremba and published by . This book was released on 2018 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book The Time Series Behavior and Pricing of Idiosyncratic Volatility written by Paul Brockman and published by . This book was released on 2008 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent research on idiosyncratic volatility has documented three main empirical findings. First, Campbell, Lettau, Malkiel, and Xu (2001) show that idiosyncratic volatility exhibits an upward trend between 1962 and 1997. Second, Goyal and Santa-Clara (2003) find that aggregate measures of idiosyncratic volatility predict one-month-ahead excess market returns from 1962 to 1999. Third, Ang, Hodrick, Xing, and Zhang (2006) report a negative and significant relation between idiosyncratic volatility and cross-sectional stock returns from 1963 to 2000. We re-examine these three findings using a 37-year holdout sample of daily returns from 1926 to 1962. We find robust empirical evidence of (1) a statistically significant downward trend in idiosyncratic volatility, (2) an insignificant relation between average idiosyncratic volatility and one-month-ahead excess market returns, and (3) a highly significant inverse relation between idiosyncratic volatility and cross-sectional stock returns. These results shed new light on the time-series behavior and pricing of idiosyncratic volatility.
Download or read book Higher Idiosyncratic Moments and the Cross section of Expected Stock Returns written by John Byong Tek Lee and published by . This book was released on 2008 with total page 250 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Idiosyncratic Volatility and the Pricing of Poorly Diversified Portfolios written by Joëlle Miffre and published by . This book was released on 2015 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article examines the role of idiosyncratic volatility in explaining the cross-sectional variation of size- and value-sorted portfolio returns. We show that the premium for bearing idiosyncratic volatility varies inversely with the number of stocks included in the portfolios. This conclusion is robust within various multifactor models based on size, value, past performance, liquidity and total volatility and also holds within an ICAPM specification of the risk-return relationship. Our findings thus indicate that investors demand an additional return for bearing the idiosyncratic volatility of poorly-diversified portfolios.
Download or read book Revisiting Idiosyncratic Volatility and Stock Returns written by Fatma Saryal Sonmez and published by . This book was released on 2013 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper's aim is to revisit the relation between idiosyncratic volatility and future stock returns. There are three key findings: First, we confirm earlier studies which show a negative relation. Further we show that it is the month to month changes in idiosyncratic volatility that produce this observed relation. More specifically, a portfolio of stocks that move from a lower (higher) idiosyncratic volatility quintile to higher (lower) one earns positive (negative) abnormal returns. Eliminating all firm-month observations with idiosyncratic volatility quintile changes, we find a positive relation. Second, we link our findings with corporate related events. Third, we find that after 2000, the idiosyncratic volatility effect disappears.
Download or read book Price Based Investment Strategies written by Adam Zaremba and published by Springer. This book was released on 2018-07-25 with total page 325 pages. Available in PDF, EPUB and Kindle. Book excerpt: This compelling book examines the price-based revolution in investing, showing how research over recent decades has reinvented technical analysis. The authors discuss the major groups of price-based strategies, considering their theoretical motivation, individual and combined implementation, and back-tested results when applied to investment across country stock markets. Containing a comprehensive sample of performance data, taken from 24 major developed markets around the world and ranging over the last 25 years, the authors construct practical portfolios and display their performance—ensuring the book is not only academically rigorous, but practically applicable too. This is a highly useful volume that will be of relevance to researchers and students working in the field of price-based investing, as well as individual investors, fund pickers, market analysts, fund managers, pension fund consultants, hedge fund portfolio managers, endowment chief investment officers, futures traders, and family office investors.
Download or read book The Second Moment Matters Cross Sectional Dispersion of Firm Valuations and Expected Stock Returns written by Danling Jiang and published by . This book was released on 2013 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: Behavioral theories predict that firm valuation dispersion in the cross section (ldquo;dispersionrdquo;) measures aggregate overpricing caused by investor overconfidence and should be negatively related to expected aggregate returns. This paper develops and tests these hypotheses. Consistent with the model predictions, I find that measures of dispersion are positively related to aggregate valuations, trading volume, idiosyncratic volatility, past market returns, and current and future investor sentiment indexes. Dispersion is a strong negative predictor of subsequent shortand long-term market excess returns. Market beta is positively related to stock returns when the beginning-of-period dispersion is low and this relationship reverses when initial dispersion is high. A simple forecast model based on dispersion significantly outperforms a naive model based on historical equity premium in out-of-sample tests and the predictability is stronger in economic downturns.
Download or read book Idiosyncratic Volatility and Stock Returns written by Kuntara Pukthuanthong and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Empirical evidences regarding the association of idiosyncratic volatility and stock returns are inconsistent with the capital asset pricing model (CAPM) which implies that idiosyncratic risk should not be priced because it would be fully eliminated through diversification. Using estimated-EGARCH conditional idiosyncratic volatility of individual stocks across 36 countries from 1973 to 2007, we find that idiosyncratic risk is priced on a significantly positive risk premium for stock returns. The evidence is statistically and economically significant. It overwhelmingly supports the prediction of existing theories that idiosyncratic risk is positively related to expected returns.
Download or read book Idiosyncratic Volatility Stock Returns and Priming Processes written by Nir Chen and published by . This book was released on 2017 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:
