scholarly journals A Revisit on Idiosyncratic Volatility Puzzle: Evidence from Sri Lanka

2020 ◽  
Vol 8 (2) ◽  
Author(s):  
H. A. P. K. Perera ◽  
T. C. Ediriwickrama
Keyword(s):  
Sri Lanka ◽  
Idiosyncratic Volatility ◽  
Volatility Puzzle ◽  
Idiosyncratic Volatility Puzzle

The Idiosyncratic Volatility Puzzle: Time Trend or Speculative Episodes?

2008 ◽  
Author(s):  
Michael W. Brandt ◽  
Alon P. Brav ◽  
John R. Graham ◽  
Alok Kumar
Keyword(s):  
Time Trend ◽  
Idiosyncratic Volatility ◽  
Volatility Puzzle ◽  
Idiosyncratic Volatility Puzzle

scholarly journals Daily Winners and Losers in the Korean Stock Market

2020 ◽  
Vol 49 (4) ◽  
pp. 565-588
Author(s):  
Jangkoo Kang ◽  
Jaesun Yun
Keyword(s):  
Stock Market ◽  
Idiosyncratic Volatility ◽  
Investor Attention ◽  
Foreign Investors ◽  
Working Paper ◽  
Retail Investors ◽  
Korean Stock Market ◽  
Main Driver ◽  
Volatility Puzzle ◽  
Idiosyncratic Volatility Puzzle

In their working paper, Kumar, Ruenzi, and Ungeheuer (KRU) document that stocks ranked as daily winners or losers in the previous month underperform unranked stocks during the month after the ranking. KRU explain that the ranked stocks experience a large increase in investor attention, which leads to temporary overpricing and subsequent underperformance. Following KRU, we investigate whether the same effect exists in the Korean stock market and find a robust daily winners and losers effect. First, stocks that were both daily winners and losers in a given month underperform those that were neither daily winners nor losers during the following months. Second, stocks that were never a daily winner or loser during the previous month do not exhibit the idiosyncratic volatility puzzle or the MAX effect. Moreover, the underperformance of ranked stocks is robust after controlling for the idiosyncratic volatility and the MAX effect. We suggest that the overpricing caused by excessive attention to daily winners and losers may be the main driver of the idiosyncratic volatility puzzle and the MAX effect. Lastly, we find that retail investors buy daily winners and losers, while both institutional investors and foreign investors decrease trades in the ranked stocks.

Heterogeneous beliefs and idiosyncratic volatility puzzle: evidence from China

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mao He ◽  
Juncheng Huang ◽  
Hongquan Zhu
Keyword(s):  
Stock Returns ◽  
Trading Volume ◽  
Factor Model ◽  
Heterogeneous Beliefs ◽  
Idiosyncratic Volatility ◽  
Chinese Stock Market ◽  
Content Type ◽  
Volatility Puzzle ◽  
The Relationship ◽  
Idiosyncratic Volatility Puzzle

PurposeThe purpose of our study is to explore the “idiosyncratic volatility puzzle” in Chinese stock market from the perspective of investors' heterogeneous beliefs. To delve into the relationship between idiosyncratic volatility and investors' heterogeneous beliefs, and uncover the ability of heterogeneous beliefs, as well as to explain the “idiosyncratic volatility puzzle”, we construct our study as follows.Design/methodology/approachOur study adopts the unexpected trading volume as proxies of heterogeneity, the residual of Fama–French three-factor model as proxies of idiosyncratic volatility. Portfolio strategies and Fama–MacBeth regression are used to investigate the relationship between the two proxies and stock returns in Chinese A-share market.FindingsInvestors' heterogeneous beliefs, as an intermediary variable, are positively correlated with idiosyncratic volatility. Meanwhile, it could better demonstrate the negative correlation between the idiosyncratic volatility and future stock returns. It is one of the economic mechanisms linking idiosyncratic volatility to subsequent stock returns, which can account for 11.28% of the puzzle.Originality/valueThe findings indicate that idiosyncratic volatility is significantly and positively correlated with heterogeneous beliefs and that heterogeneous beliefs are effective intervening variables to explain the “idiosyncratic volatility puzzle”.

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