Firm-Level Cybersecurity Risk and Idiosyncratic Volatility

2021 ◽  
Vol 47 (9) ◽  
pp. 110-140
Author(s):  
Nazli Sila Alan ◽  
Ahmet K. Karagozoglu ◽  
Tianpeng Zhou
Keyword(s):  
Idiosyncratic Volatility ◽  
Firm Level

The Determinants of Idiosyncratic Volatility

2017 ◽  
Vol 25 (4) ◽  
pp. 509-545
Author(s):  
Jaeuk Khil ◽  
Song Hee Kim ◽  
Eun Jung Lee
Keyword(s):  
Growth Rate ◽  
Time Series ◽  
Cross Section ◽  
Growth Rates ◽  
Idiosyncratic Volatility ◽  
Return Volatility ◽  
Firm Level ◽  
Cross Sectional ◽  
Asset Growth ◽  
The Cross

We investigate the cross-sectional and time-series determinants of idiosyncratic volatility in the Korean market. In particular, we focus on the empirical relation between firms’ asset growth rate and idiosyncratic stock return volatility. We find that, in the cross-section, companies with high idiosyncratic volatility tend to be small and highly leveraged, have high variance of ROE and Market to Book ratio, high turnover rate, and pay no dividends. Furthermore, firms with extreme (either high positive or negative) asset growth rates have high idiosyncratic return volatility than firms with moderate growth rates, suggesting the V-shaped relation between asset growth rate and idiosyncratic return volatility. We find that the V-shaped relation is robust even after controlling for other factors. In time-series, we find that firm-level idiosyncratic volatility is positively related to the dispersion of the cross-sectional asset growth rates. As a result, this study is contributed to show that the asset growth is the most important predictor of firm-level idiosyncratic return volatility in both the cross-section and the time-series in the Korean stock market. In addition, we show how the effect of risk factors varies with industries.

Bayesian Analysis of Stochastic Betas

2005 ◽  
Vol 40 (4) ◽  
pp. 747-778 ◽  
Author(s):  
Gergana Jostova ◽  
Alexander Philipov
Keyword(s):  
Asset Pricing ◽  
Stock Returns ◽  
Idiosyncratic Volatility ◽  
Firm Level ◽  
Conditional Capm ◽  
Asset Pricing Anomalies ◽  
Proposed Model ◽  
Out Of Sample ◽  
Market Beta ◽  
Rolling Regression

AbstractWe propose a mean-reverting stochastic process for the market beta. In a simulation study, the proposed model generates significantly more precise beta estimates than GARCH betas, betas conditioned on aggregate or firm-level variables, and rolling regression betas, even when the true betas are generated based on these competing specifications. Our model significantly improves out-of-sample hedging effectiveness. In asset pricing tests, our model provides substantially stronger support for the conditional CAPM relative to competing beta models and helps resolve asset pricing anomalies such as the size, book-to-market, and idiosyncratic volatility effects in the cross section of stock returns.

Testing International Asset Pricing Models Using Implied Costs of Capital

2009 ◽  
Vol 44 (2) ◽  
pp. 307-335 ◽  
Author(s):  
Charles Lee ◽  
David Ng ◽  
Bhaskaran Swaminathan
Keyword(s):  
Asset Pricing ◽  
World Market ◽  
Idiosyncratic Volatility ◽  
Expected Returns ◽  
International Asset Pricing ◽  
Pricing Models ◽  
Firm Level ◽  
Economic Relations ◽  
Asset Pricing Models ◽  
Market Beta

AbstractThis paper tests international asset pricing models using firm-level expected returns estimated from an implied cost of capital approach. We show that the implied approach provides clear evidence of economic relations that would otherwise be obscured by the noise in realized returns. Among G-7 countries, expected returns based on implied costs of capital have less than one-tenth the volatility of those based on realized returns. Our tests show that firm-level expected returns increase with world market beta, idiosyncratic volatility, financial leverage, and book-to-market ratios, and decrease with currency beta and firm size.

scholarly journals The cross-section of expected stock returns and components of idiosyncratic volatility

2021 ◽  
Author(s):  
◽  
Seyed Reza Tabatabaei Poudeh
Keyword(s):  
Risk Factors ◽  
Stock Returns ◽  
Cross Section ◽  
Idiosyncratic Volatility ◽  
Firm Level ◽  
Cross Sectional ◽  
Expected Stock Returns ◽  
Book To Market Ratio ◽  
Alpha Risk ◽  
The Relationship

We examine the relationship between stock returns and components of idiosyncratic volatility—two volatility and two covariance terms— derived from the decomposition of stock returns variance. The portfolio analysis result shows that volatility terms are negatively related to expected stock returns. On the contrary, covariance terms have positive relationships with expected stock returns at the portfolio level. These relationships are robust to controlling for risk factors such as size, book-to-market ratio, momentum, volume, and turnover. Furthermore, the results of Fama-MacBeth cross-sectional regression show that only alpha risk can explain variations in stock returns at the firm level. Another finding is that when volatility and covariance terms are excluded from idiosyncratic volatility, the relation between idiosyncratic volatility and stock returns becomes weak at the portfolio level and disappears at the firm level.

Stock Returns, Implied Volatility Innovations, and the Asymmetric Volatility Phenomenon

2006 ◽  
Vol 41 (2) ◽  
pp. 381-406 ◽  
Author(s):  
Patrick Dennis ◽  
Stewart Mayhew ◽  
Chris Stivers
Keyword(s):  
Stock Returns ◽  
Implied Volatility ◽  
Idiosyncratic Volatility ◽  
Firm Level ◽  
Stock Volatility ◽  
Present Evidence ◽  
Asymmetric Volatility ◽  
Dynamic Relation ◽  
Daily Stock Returns

AbstractWe study the dynamic relation between daily stock returns and daily innovations in optionderived implied volatilities. By simultaneously analyzing innovations in index- and firmlevel implied volatilities, we distinguish between innovations in systematic and idiosyncratic volatility in an effort to better understand the asymmetric volatility phenomenon. Our results indicate that the relation between stock returns and innovations in systematic volatility (idiosyncratic volatility) is substantially negative (near zero). These results suggest that asymmetric volatility is primarily attributed to systematic market-wide factors rather than aggregated firm-level effects. We also present evidence that supports our assumption that innovations in implied volatility are good proxies for innovations in expected stock volatility.

Marshallian Cross: An Alternative Justification and Related Issues

2013 ◽  
pp. 108-120 ◽  
Author(s):  
L. Grebnev
Keyword(s):  
Alternative Treatment ◽  
Supply And Demand ◽  
Firm Level ◽  
Economics Courses ◽  
Introductory Economics

The paper provides a justification of the laws of supply and demand using the concept of a marginal firm (technology) for the case of perfect competition.The ideological factor of excessive attention to the analysis of marginal parameters at the firm level in the introductory economics courses is discussed. The author connects these issues to the ideas of J. B. Clark and gives an alternative treatment of exploitation.

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