Garcia, René; Mantilla-Garcia, Daniel; Martellini, Lionel - Centre Interuniversitaire de Recherche en Analyse des … - 2013
In this paper, we formally show that the cross-sectional variance of stock returns is a consistent and asymptotically efficient estimator for aggregate idiosyncratic volatility. This measure has two key advantages: it is model-free and observable at any frequency. Previous approaches have used...