Nieuwerburgh, Stijn Van; Lustig, Hanno; Kelly, Bryan; … - Society for Economic Dynamics - SED - 2014
We show that firms' idiosyncratic volatility in returns and cash flows obeys a strong factor structure. We find that the stocks of firms with large, negative common idiosyncratic volatility (CIV) factor betas earn high average returns. The CIV beta quintile spread is 6.4% per year. To explain...