Is The Idiosyncratic Volatility Puzzle Driven By A Missing Factor?

• 영문명: Is The Idiosyncratic Volatility Puzzle Driven By A Missing Factor?
• 발행기관: 강원대학교 경영경제연구소
• 저자명: Hanjun Kim Bumjean Sohn
• 간행물 정보: 『아태비즈니스연구』제15권 제1호, 1~14쪽, 전체 14쪽
• 주제분류: 인문학 > 문학
• 파일형태: PDF
• 발행일자: 2024.03.30

영문 초록

Purpose - We investigate whether a potential missing pricing factor plays a significant role in the idiosyncratic volatility puzzle. Design/methodology/approach - We theoretically show how a missing pricing factor can affect the idiosyncratic volatility puzzle, and also show how to get around the problem empirically. We adopt the Fama-French five factor model for the estimation of the idiosyncratic risk and use randomly constructed portfolios as test assets. Findings - We find that a missing factor does not drive the idiosyncratic volatility puzzle. Thus, we conclude that the idiosyncratic volatility does affect the risk premium of its stock. Research implications or Originality - The Fama-French five factor model does a pretty good job in explaining the risk premiums of stocks, and it can be used to reliably estimate idiosyncratic risk of stocks.

목차

Ⅰ. Introduction

Ⅱ. Theoretical Motivation

Ⅲ. Empirical Analysis

Ⅳ. Conclusion

References

키워드

Cross-Section of Equity Returns Idiosyncratic Risk Idiosyncratic Volatility Puzzle Missing Factor Random Portfolio