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Idiosyncratic volatility: the myth-busting effect of measurement error and market structure*
| Content Provider | Semantic Scholar |
|---|---|
| Author | Leippold, Markus Svatoň, Michal |
| Copyright Year | 2018 |
| Abstract | We reexamine the evolution of idiosyncratic volatility (IV) of US firms between 1962 and 2016, and its relation to expected returns. The unusually high variance of new firmly listed stocks from 1962 to 1997 materializes in a trend in the IV and, contrary to the conclusions of related studies, in systemic risk. A decreasing market concentration attenuates the trend in the latter before 1997. The subsequent reversal of IV stems from the bias in correlations before 1997 due to measurement errors among existing illiquid stocks. Young and distressed stocks are crucial for obtaining the negative IV-expected return relation. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://wp.lancs.ac.uk/finec2018/files/2018/09/FINEC-2018-066-Michal-Svaton.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
