The well-documented negative association between idiosyncratic volatility (IV) and stock returns is puzzling if investors are risk-averse. We show that this anomaly is also prominent in the Chinese stock market. We attempt to explain the IV anomaly by using the key theories suggested by the...

Using a series of advanced tests from White's (2000) “Reality Check” to correct for data-snooping bias, we assess the out-of-sample performance of various portfolio strategies relative to the naive 1/N rule. When we analyze 16 basic portfolio strategies, 126 learning strategies, and nearly...

In this paper, we develop a theoretical model to explain the well-established empirical regularities that have been documented in the literature on closed-end funds (CEFs). In the presence of heterogeneous beliefs and short-sale constraints, both the CEF price and the price of the assets that it...

The non‐normality of financial asset returns has important implications for hedging. In particular, in contrast with the unambiguous effect that minimum‐variance hedging has on the standard deviation, it can actually increase the negative skewness and kurtosis of hedge portfolio returns....

The non-normality of financial asset returns has important implications for hedging. In particular, in contrast with the unambiguous effect that minimum-variance hedging has on the standard deviation, it can actually increase the negative skewness and kurtosis of hedge portfolio returns. Thus...