Idiosyncratic Volatility and Expected Returns at the Global Level

2015 ◽  
Author(s):  
Mehmet Umutlu
Keyword(s):  
Idiosyncratic Volatility ◽  
Expected Returns ◽  
Global Level

Idiosyncratic Volatility and the Cross Section of Expected Returns

2008 ◽  
Vol 43 (1) ◽  
pp. 29-58 ◽  
Author(s):  
Turan G. Bali ◽  
Nusret Cakici
Keyword(s):  
Stock Returns ◽  
Cross Section ◽  
Idiosyncratic Volatility ◽  
Expected Returns ◽  
Cross Sectional ◽  
Monthly Data ◽  
Portfolio Returns ◽  
Expected Stock Returns ◽  
The Cross ◽  
Data Frequency

AbstractThis paper examines the cross-sectional relation between idiosyncratic volatility and expected stock returns. The results indicate that i) the data frequency used to estimate idiosyncratic volatility, ii) the weighting scheme used to compute average portfolio returns, iii) the breakpoints utilized to sort stocks into quintile portfolios, and iv) using a screen for size, price, and liquidity play critical roles in determining the existence and significance of a relation between idiosyncratic risk and the cross section of expected returns. Portfoliolevel 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 no robustly significant relation exists between idiosyncratic volatility and expected returns.

Another Look at Idiosyncratic Volatility and Expected Returns

2009 ◽  
Author(s):  
Wei Huang ◽  
Qianqiu Liu ◽  
S. Ghon Rhee ◽  
Liang Zhang
Keyword(s):  
Idiosyncratic Volatility ◽  
Expected Returns

Testing International Asset Pricing Models Using Implied Costs of Capital

2009 ◽  
Vol 44 (2) ◽  
pp. 307-335 ◽  
Author(s):  
Charles Lee ◽  
David Ng ◽  
Bhaskaran Swaminathan
Keyword(s):  
Asset Pricing ◽  
World Market ◽  
Idiosyncratic Volatility ◽  
Expected Returns ◽  
International Asset Pricing ◽  
Pricing Models ◽  
Firm Level ◽  
Economic Relations ◽  
Asset Pricing Models ◽  
Market Beta

AbstractThis paper tests international asset pricing models using firm-level expected returns estimated from an implied cost of capital approach. We show that the implied approach provides clear evidence of economic relations that would otherwise be obscured by the noise in realized returns. Among G-7 countries, expected returns based on implied costs of capital have less than one-tenth the volatility of those based on realized returns. Our tests show that firm-level expected returns increase with world market beta, idiosyncratic volatility, financial leverage, and book-to-market ratios, and decrease with currency beta and firm size.

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