Download or read book Have We Solved the Idiosyncratic Volatility Puzzle written by Kewei Hou and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Idiosyncratic Volatility Puzzle written by Brad Cannon and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Have Hedge Funds Solved the Idiosyncratic Volatility Puzzle written by Turan G. Bali and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Idiosyncratic Volatility Puzzle written by Michael W. Brandt and published by . This book was released on 2009 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: Campbell, Lettau, Malkiel, and Xu (2001) document a positive trend in idiosyncratic volatility during the 1962 to 1997 period. We show that this trend completely reverses itself by 2007, falling below pre-1990s levels. Furthermore, we show that the reversal is concentrated among firms with low stock prices and high retail ownership. This evidence suggests that the increase in idiosyncratic volatility through the 1990s was not a time trend but, rather, an episodic phenomenon, at least partially associated with retail investors. Results from cross-sectional regressions, conditional trend estimation, stock-split events, and attention-grabbing events are consistent with a retail trading effect.

Download or read book The Idiosyncratic Volatility Puzzle and Its Interplay with Sophisticated and Private Investors written by Hannes Mohrschladt and published by . This book was released on 2018 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: We establish a direct link between the idiosyncratic volatility (IVol) puzzle and the behavior of sophisticated and private investors. To do so, we employ three option-based measures of informed trading and attention data from Google Trends. Our analyses show that the IVol puzzle is particularly driven by a group of overpriced stocks that can be identified by the use of sophisticated trader opinion. Since IVol is no perfect mispricing indicator, the option measures can help to distinguish high-IVol stocks that are overvalued from high-IVol stocks that are not exposed to mispricing. We link the origin of the anomaly to the trading activity of irrational private investors. This supports the intuitive idea that noise trading leads to mispricing which can be exploited by sophisticated investors at the option market.

Download or read book Idiosyncratic Volatility Puzzle the Role of Assets Interconnections written by Roberto Calogero Panzica and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper investigates the determinants of the idiosyncratic volatility puzzle by allowing linkages across asset returns. The first contribution of the paper is to show that portfolios sorted by increasing indegree computed on the network based on Granger causality test have lower expected returns, not related to idiosyncratic volatility. Secondly, empirical evidence indicates that stocks with higher idiosyncratic volatility have the lower exposition on the indegree risk factor.

Download or read book Idiosyncratic Volatility Puzzle written by Nektarios Aslanidis and published by . This book was released on 2017 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the cross-sectional relation between expected idiosyncratic volatility and stock returns. The expected idiosyncratic volatility is conditioned on macro-finance factors as well as traditional asset pricing factors. The macro-finance factors are constructed from a large set of macroeconomic and financial variables. Our results show that the negative relation between expected idiosyncratic volatility and stock returns reverses to a positive one when accounting for the macro-finance effects. Portfolio analysis shows that the positive relation is economically important. The relation between expected idiosyncratic volatility and returns is not affected by business cycle variations. The empirical results are highly robust.

Download or read book Idiosyncratic Volatility Puzzle written by and published by . This book was released on 2015 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Arbitrage Asymmetry and the Idiosyncratic Volatility Puzzle written by Robert F. Stambaugh and published by . This book was released on 2020 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many investors purchase stock but are reluctant or unable to sell short. Combining this arbitrage asymmetry with the arbitrage risk represented by idiosyncratic volatility (IVOL) explains the negative relation between IVOL and average return. The IVOL-return relation is negative among overpriced stocks but positive among underpriced stocks, with mispricing determined by combining 11 return anomalies. Consistent with arbitrage asymmetry, the negative relation among overpriced stocks is stronger, especially for stocks less easily shorted, so the overall IVOL-return relation is negative. Further supporting our explanation, high investor sentiment weakens the positive relation among underpriced stocks and, especially, strengthens the negative relation among overpriced stocks.

Download or read book Financial Distress the Idiosyncratic Volatility Puzzle and Expected Returns written by Qingyi (Freda) Song Drechsler and published by . This book was released on 2009 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores the asset pricing impact of financial distress and idiosyncratic volatility on cross-sectional stock returns. We show that the puzzling negative correlation between idiosyncratic volatility and return is a manifestation of financial distress. Using daily and monthly return data from 1971 to 2006, we show that while the volatility spread is -1.68% for the most distressed stocks, it is actually positive and significant at 0.61% per month for the least distressed ones. This indicates that financial distress has a more fundamental impact on the cross-sectional returns than idiosyncratic volatility. As volatility is one of the inputs in the measurement of distress, we address the potential endogenous relationship between distress and idiosyncratic volatility using various robustness checks. Moreover, in a horse-race comparison under the Fama-MacBeth firm-level regression set up, financial distress takes away the explanatory power of idiosyncratic volatility on cross-sectional stock returns. Interaction of financial distress with other asset-pricing anomalies, including momentum and value effects, is also explored. It is shown that the momentum effect is mostly driven by the group of most distressed stocks. And similarly, the value effect is the strongest among this group of stocks.

Download or read book Short Sale Constraints and the Idiosyncratic Volatility Puzzle written by Danling Jiang and published by . This book was released on 2014 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using three natural experiments, we test the hypothesis that investor overconfidence produces overpricing of high idiosyncratic volatility stocks in the presence of binding short-sale constraints. We study three events: IPO lockup expirations, option introductions, and the 2008 short-sale ban on financial firms. Consistent with our prediction, we show that when short-sale constraints are relaxed, event stocks with high idiosyncratic volatility tend to experience greater price reductions, as well as larger increases in trading volume and short interest, than those with low idiosyncratic volatility. These results hold when we benchmark event stocks with non-event stocks with comparable idiosyncratic volatility. Overall, our findings suggest that biased investor beliefs and binding short-sale constraints contribute to idiosyncratic volatility overpricing.

Download or read book Arbitrage Asymmetry and the Idiosyncratic Volatility Puzzle written by Robert F. Stambaugh and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Short selling, as compared to purchasing, faces greater risks and other potential impediments. This arbitrage asymmetry explains the negative relation between idiosyncratic volatility (IVOL) and average return. The IVOL effect is negative among overpriced stocks but positive among underpriced stocks, with mispricing determined by combining 11 return anomalies. The negative effect is stronger, consistent with asymmetry in risks and other impediments inhibiting arbitrageurs in exploiting overpricing. Aggregating across all stocks therefore yields a negative relation, explaining the IVOL puzzle. Further supporting our explanation is a negative relation over time between the IVOL effect and investor sentiment, especially among overpriced stocks.

Download or read book Strategic Risk Shifting and the Idiosyncratic Volatility Puzzle written by and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Lottery Preferences and the Idiosyncratic Volatility Puzzle written by Doina Chichernea and published by . This book was released on 2018 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the empirical implications of investors' heterogeneous preferences for skewness with respect to the idiosyncratic volatility (IVOL) puzzle (the negative correlation between idiosyncratic volatility and mean returns). We show that the IVOL puzzle is stronger: (1) within those stocks held primarily by agents with preference for lottery-like payoffs and, (2) during economic downturns, when the demand for lottery-like payoffs is high. These results support recent theories that suggest lottery preferences may be a significant source of the IVOL puzzle.

Download or read book In Search of Systematic Risk and the Idiosyncratic Volatility Puzzle in the Corporate Bond Market written by Jennie Bai and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Extreme Returns and the Idiosyncratic Volatility Puzzle written by Ji (George) Wu and published by . This book was released on 2018 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Motivated by Bali et al. (2011) and Ang et al. (2006 & 2009), we examine the cross-sectional relationship between the expected stock return and both the maximum daily return (MAX) and the idiosyncratic volatility (IVOL) in the five largest emerging African stock markets over the period from 2001 to 2015. First, we find that there is a robust and significantly negative MAX effect in the pooled African stock markets. Second, though we initially document a negative IVOL effect, it disappears after controlling for MAX. Finally, the negative MAX effect is only significant in the small-SIZE, high-illiquidity, and high-skewness portfolios. Our results suggest risk-seeking behavior among African investors similar to that in other parts of the world.

Download or read book 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 published by GRIN Verlag. This book was released on 2020-04-23 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.