We formulate a stylized model that admits volatility ambiguity to the Lucas framework. The model specifies an … economically motivated ambiguity penalty function that makes volatility ambiguity quantifiable with χ2-statistics, and allows for … analytical solutions. The addition of volatility ambiguity greatly expands the range of possible equilibrium outcomes of the …

Purpose: The current research is to investigate the time series behavior of idiosyncratic volatility (IVOL) and its … trends in aggregate idiosyncratic and market volatility using Bunzel and Vogelsang's (2005) t-dan test. We follow Bekaert et … cross-sectional stock returns in French stock market.Findings: First, we find that both idiosyncratic and market volatility …

This study fi nds that a novel transformation of the idiosyncratic volatility (IVOL), the unit shocks of IVOL (US …

volatility sorted portfolios. Our time-series analyses document significant portfolio return exposures to aggregate tail risk. In … particular, portfolios that contain small, value, high idiosyncratic volatility, and low momentum stocks exhibit negative and … in explaining the four pricing anomalies, particularly size and idiosyncratic volatility anomalies …

Using firm-level option and stock data, we examine the predictive ability of option-implied volatility measures … non-zero risk-adjusted returns on arbitrage portfolios formed on the call-put implied volatility spread, implied … volatility skew, and realized-implied volatility spread. Firm-level cross-sectional regressions show that, the implied volatility …

expected stock return and both the maximum daily return (MAX) and the idiosyncratic volatility (IVOL) in the five largest …

with higher pre-crisis earnings volatility, causing investors to demand a higher ambiguity premium for such firms. While … there is no relation between earnings volatility and stock returns under normal conditions, there is a significant negative … relation between crisis-period stock returns and prior earnings volatility. In other words, during economic turmoil, investors …