Does Idiosyncratic Risk Really Matter?
<link rid="b11">Goyal and Santa-Clara (2003)</link> find a significantly positive relation between the equal-weighted average stock volatility and the value-weighted portfolio returns on the NYSE/AMEX/Nasdaq stocks for the period of 1963:08 to 1999:12. We show that this result is driven by small stocks traded on the Nasdaq, and is in part due to a liquidity premium. In addition, their result does not hold for the extended sample of 1963:08 to 2001:12 and for the NYSE/AMEX and NYSE stocks. More importantly, we find no evidence of a significant link between the value-weighted portfolio returns and the median and value-weighted average stock volatility. Copyright 2005 by The American Finance Association.
Year of publication: |
2005
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Authors: | BALI, TURAN G. ; CAKICI, NUSRET ; XUEMIN (STERLING) YAN ; ZHANG, ZHE |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 60.2005, 2, p. 905-929
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Publisher: |
American Finance Association - AFA |
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