Recent studies suggest an increasing trend in return idiosyncratic volatility and a ‘puzzling’ negative relationship between idiosyncratic and total volatility and stock returns. We investigate in an emerging market, the time-series behaviour of total and idiosyncratic volatility and their...

Average idiosyncratic volatility and firm idiosyncratic volatility increase with the number of listed firms. Average industry idiosyncratic volatility increases with the number of listed firms in the industry. We ex-plain the relation between idiosyncratic volatility and the number of listed...

This Paper investigates the link between a firm’s competitive environment and the idiosyncratic volatility of its stock returns. We find that firms enjoying high market power, or established in concentrated industries, have lower idiosyncratic volatility. We posit that competition affects...

We investigate the relationship between changing correlation structure of returns, security risk, and mean return. According to our results, securities that were highly correlated with the market-wide risk factors in the past are likely to have high systematic and idiosyncratic risk at present....

We propose a measure for extreme downside risk (EDR) to investigate whether bearing such a risk is rewarded by higher expected stock returns. By constructing an EDR proxy with the left tail index in the classical generalized extreme value distribution, we document a significantly positive EDR...

Idiosyncratic risk has been the subject of a great deal of international financial research. However, one question remains unsolved thus far: how to introduce it in asset pricing models. The aim of this paper is two-fold. Firstly, we propose and compare two alternative implications of...

Using three natural experiments, we test the hypothesis that investor overconfidence produces overpricing of high idiosyncratic volatility stocks in the presence of binding short-sale constraints. We study three events: IPO lockup expirations, option introductions, and the 2008 short-sale ban on...

This article examines the role of idiosyncratic volatility in explaining the cross-sectional variation of size- and value-sorted portfolio returns. We show that the premium for bearing idiosyncratic volatility varies inversely with the number of stocks included in the portfolios. This conclusion...

We test the hypothesis that individual investors contribute to the idiosyncratic volatility of stock returns because they act as noise traders. To this end, we consider a reform that makes short selling or buying on margin more expensive for retail investors relative to institutions, for a...

This study analyzes the effects of six different credit rating announcements on systematic and idiosyncratic risks in Spanish stocks from 1988 to 2010. We used an extension of the event study dummy approach that includes direct effects on beta risk and volatility. We identified effects on both...