Idiosyncratic Volatility Puzzle: Influence of Macro-Finance Factors
Publikation: Working paper › Forskning
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Idiosyncratic Volatility Puzzle : Influence of Macro-Finance Factors. / Aslanidis, Nektarios; Christiansen, Charlotte; Lambertides, Neophytos; Savva, Christos S.
Aarhus : Institut for Økonomi, Aarhus Universitet, 2014.Publikation: Working paper › Forskning
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TY - UNPB
T1 - Idiosyncratic Volatility Puzzle
T2 - Influence of Macro-Finance Factors
AU - Aslanidis, Nektarios
AU - Christiansen, Charlotte
AU - Lambertides, Neophytos
AU - Savva, Christos S.
PY - 2014/11/24
Y1 - 2014/11/24
N2 - In this paper, we scrutinize the cross-sectional relation between idiosyncratic volatility and stock returns. As a novelty, the idiosyncratic volatility is obtained by conditioning upon macro-Önance factors as well as upon traditional asset pricing factors. The macro-Önance factors are constructed from a large pool of macroeconomic and Önancial variables. Cleaning for macro-Önance e§ects reverses the puzzling negative relation between returns and idiosyncratic volatility documented previously. Portfolio analysis shows that the e§ects from macro-Önance factors are economically strong. The relation between idiosyncratic volatility and returns does not vary with the NBER business cycles. The empirical results are highly robust.
AB - In this paper, we scrutinize the cross-sectional relation between idiosyncratic volatility and stock returns. As a novelty, the idiosyncratic volatility is obtained by conditioning upon macro-Önance factors as well as upon traditional asset pricing factors. The macro-Önance factors are constructed from a large pool of macroeconomic and Önancial variables. Cleaning for macro-Önance e§ects reverses the puzzling negative relation between returns and idiosyncratic volatility documented previously. Portfolio analysis shows that the e§ects from macro-Önance factors are economically strong. The relation between idiosyncratic volatility and returns does not vary with the NBER business cycles. The empirical results are highly robust.
KW - Idiosyncratic volatility puzzle, Macro-finance predictors, Factor analysis, Business cycle
KW - Idiosyncratic volatility puzzle
KW - Macro-finance predictors
KW - Factor analysis
KW - Business cycle
M3 - Working paper
T3 - CREATES Research Papers
BT - Idiosyncratic Volatility Puzzle
PB - Institut for Økonomi, Aarhus Universitet
CY - Aarhus
ER -