Idiosyncratic volatility puzzle : influence of macro-finance factors
(2019) In Review of Quantitative Finance and Accounting 52(2). p.381-401- Abstract
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.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/dea83e6d-5819-4890-ac71-9f4a83cf83ba
- author
- Aslanidis, Nektarios ; Christiansen, Charlotte LU ; Lambertides, Neophytos and Savva, Christos S.
- organization
- publishing date
- 2019
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- Business cycle, Idiosyncratic volatility puzzle, Macro-finance factors
- in
- Review of Quantitative Finance and Accounting
- volume
- 52
- issue
- 2
- pages
- 21 pages
- publisher
- Springer
- external identifiers
-
- scopus:85042586053
- ISSN
- 0924-865X
- DOI
- 10.1007/s11156-018-0713-x
- language
- English
- LU publication?
- yes
- id
- dea83e6d-5819-4890-ac71-9f4a83cf83ba
- date added to LUP
- 2018-03-08 11:01:04
- date last changed
- 2022-04-25 06:10:50
@article{dea83e6d-5819-4890-ac71-9f4a83cf83ba,
abstract = {{<p>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.</p>}},
author = {{Aslanidis, Nektarios and Christiansen, Charlotte and Lambertides, Neophytos and Savva, Christos S.}},
issn = {{0924-865X}},
keywords = {{Business cycle; Idiosyncratic volatility puzzle; Macro-finance factors}},
language = {{eng}},
number = {{2}},
pages = {{381--401}},
publisher = {{Springer}},
series = {{Review of Quantitative Finance and Accounting}},
title = {{Idiosyncratic volatility puzzle : influence of macro-finance factors}},
url = {{http://dx.doi.org/10.1007/s11156-018-0713-x}},
doi = {{10.1007/s11156-018-0713-x}},
volume = {{52}},
year = {{2019}},
}