We develop an Arbitrage Pricing Theory framework extension to study the pricing of squared returns/volatilities. We analyze the interplay between factors at the return level and those in idiosyncratic variances. We confirm the presence of a common idiosyncratic variance factor, but do not find...

In this paper we introduce the Extended Method of Moments (XMM) estimator. This estimator accommodates a more general set of moment restrictions than the standard Generalized Method of Moments (GMM) estimator. More specifically, the XMM differs from the GMM in that it can handle not only uniform...