We propose that speculative trading arising from the joint effect of investor disagreement and short-sale constraints plays an important role in explaining the idiosyncratic volatility (IVOL) puzzle, the correlation among IVOL, market beta and trading volume, and the co-movement of IVOL....

In this paper, we are interested in exploring the role of price impact, derived from the order book, in modeling and predicting stock volatility. This is motivated by the microstructure literature that focuses on the mechanics of price formation and its relevance to market quality. Using a...