The return impact of realized and expected idiosyncratic volatility |
| |
Authors: | David R. Peterson |
| |
Affiliation: | a Florida State University, Department of Finance, 821 Academic Way, Tallahassee, FL 32306, United States b University of Northern Iowa, Finance Department, 306 CBB, UNI, Cedar Falls, IA 50614-0124, United States |
| |
Abstract: | We show that the negative relation between realized idiosyncratic volatility, measured over the prior month, and returns is robust in non-January months. Controlling for realized idiosyncratic volatility, we show that the relation between returns and expected idiosyncratic volatility is positive and robust. Realized and expected idiosyncratic volatility are separate and important effects describing the cross-section of returns. We find the negative return on a zero-investment portfolio that is long high realized idiosyncratic volatility stocks and short low realized idiosyncratic volatility stocks is dependent on aggregate investor sentiment. In cross-sectional tests, we find the negative relation is weaker for stocks with a large analyst following and stronger for stocks with high dispersion of analyst forecasts. The positive relation between expected idiosyncratic volatility and returns is not due to mispricing. |
| |
Keywords: | G12 |
本文献已被 ScienceDirect 等数据库收录! |
|