Idiosyncratic Volatility and Firm-Specific News: Beyond Limited Arbitrage

2016 ◽  
Vol 45 (4) ◽  
pp. 923-951 ◽  
Author(s):  
R. Jared DeLisle ◽  
Nathan Mauck ◽  
Adam R. Smedema
Keyword(s):  
Idiosyncratic Volatility ◽  
Limited Arbitrage

scholarly journals Firm-specific News and Anomalies

2020 ◽  
Author(s):  
Hoang Van Hai ◽  
Phan Kim Tuan ◽  
Le The Phiet
Keyword(s):  
Factor Model ◽  
Idiosyncratic Volatility ◽  
Fresh Sample ◽  
Cross Sectional ◽  
Out Of Sample ◽  
Market Beta ◽  
Limited Arbitrage ◽  
Sample Test ◽  
Fama And French ◽  
Macro Finance

This study investigates the relation between idiosyncratic volatility and future returns around the firm-specific news announcements in the Korean stock market from July 1995 to June 2018. The excess returns of decile portfolios that are formed by sorting the stocks based on news and non-news idiosyncratic volatility measures. The Fama and French three-factor model is also examined to see whether systematic risk affects news and non-news idiosyncratic volatility profits. The pricing of our news and non-news idiosyncratic volatility are confirmed in the cross-sectional regression using the Fama and MacBeth method. Market beta, size, book to market, momentum, liquidity, and maximum return are controlled to determine robustness. Our empirical evidence suggests that the pricing of the non-news idiosyncratic volatility is more strongly negative compared to the news idiosyncratic volatility, which is contrary to the limited arbitrage explanation for the negative price of the idiosyncratic volatility. We find that the non-news idiosyncratic volatility has a robust negative relation to returns in non-January months. Macro-finance factors drive the conditioned on the missing risk factor hypothesis, the pricing of idiosyncratic volatility. This study contributes to a better understanding of the role of the conditional idiosyncratic volatility in asset pricing. As the Korean stocks provide a fresh sample, our non-U.S. investigation delivers a useful out-of-sample test on the pervasiveness of the non-news volatility effect across the emerging markets.

Price Momentum and Idiosyncratic Volatility

CFA Digest ◽  
2008 ◽  
Vol 38 (4) ◽  
pp. 51-52
Author(s):  
John R. Minahan
Keyword(s):  
Idiosyncratic Volatility ◽  
Price Momentum

Limited Arbitrage in Equity Markets

CFA Digest ◽  
2002 ◽  
Vol 32 (4) ◽  
pp. 70-72
Author(s):  
Michael G. Sher
Keyword(s):  
Equity Markets ◽  
Limited Arbitrage

Limited Arbitrage: The Paralysis of the Regulating Mechanism of Financial Markets

2008 ◽  
Author(s):  
Feker Bayoudh ◽  
Moez Elgaied
Keyword(s):  
Financial Markets ◽  
Limited Arbitrage

Is Idiosyncratic Volatility Really Priced?

2010 ◽  
Author(s):  
Mikael C. Bergbrant
Keyword(s):  
Idiosyncratic Volatility

The Bid-Ask Bounce Effect and the Pricing of Cross-Sectional Idiosyncratic Volatility: An Australian Study

2015 ◽  
Author(s):  
Bin Liu ◽  
Michael J. Dempsey ◽  
Monica Tan
Keyword(s):  
Idiosyncratic Volatility ◽  
Australian Study ◽  
Cross Sectional

Innovation, Good Idiosyncratic Volatility, and Stock Returns

2017 ◽  
Author(s):  
Praveen Kumar ◽  
Dongmei Li
Keyword(s):  
Stock Returns ◽  
Idiosyncratic Volatility
Sign in / Sign up

Export Citation Format

Share Document