Cao, Charles; Simin, Timothy; Zhao, Jing - In: Review of Financial Studies 21 (2008) 6, pp. 2599-2633
While recent studies document increasing idiosyncratic volatility over the past four decades, an explanation for this trend remains elusive. We establish a theoretical link between growth options available to managers and the idiosyncratic risk of equity. Empirically both the level and variance...