Huang, Wei; Liu, Qianqiu; Rhee, S. Ghon; Zhang, Liang - In: Review of Financial Studies 23 (2010) 1, pp. 147-168
The empirical evidence on the cross-sectional relation between idiosyncratic risk and expected stock returns is mixed. We demonstrate that the omission of the previous month's stock returns can lead to a negatively biased estimate of the relation. The magnitude of the omitted variable bias...