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The cross-section of expected stock returns and components of idiosyncratic volatility
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Description / Synopsis |
Description / Synopsis
We examine the relationship between stock returns and components of idiosyncratic volatility—two volatility and two covariance terms— derived from the decomposition of stock returns variance. The portfolio analysis result shows that volatility terms are negatively related to expected stock returns. On the contrary, covariance terms have positive relationships with expected stock returns at the portfolio level. These relationships are robust to controlling for risk factors such as size, book-to-market ratio, momentum, volume, and turnover. Furthermore, the results of Fama-MacBeth cross-sectional regression show that only alpha risk can explain variations in stock returns at the firm level. Another finding is that when volatility and covariance terms are excluded from idiosyncratic volatility, the relation between idiosyncratic volatility and stock returns becomes weak at the portfolio level and disappears at the firm level. |
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Persons |
Persons
Author (aut): Tabatabaei Poudeh, Seyed Reza
Thesis advisor (ths): Fu, Chengbo
Thesis advisor (ths): Chen, Jing
Degree committee member (dgc): Jensen, Erik
Degree committee member (dgc): Wan, Andy
Degree committee member (dgc): Haque, Waqar
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Degree Name
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Department
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DOI |
DOI
10.24124/2021/59167
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Degree granting institution (dgg): University of Northern British Columbia. Business Administration
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Keywords
Idiosyncratic volatility
Stock returns
Time-varying alpha and betas
Conditional model
Stock returns volatility
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1 online resource (ix, 92 pages)
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Physical Form
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Physical Description Note
PUBLISHED
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Rights Statement
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unbc_59167.pdf3.37 MB
26785-Extracted Text.txt191.06 KB
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English
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The cross-section of expected stock returns and components of idiosyncratic volatility
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application/pdf
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3537903
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