Have we solved the idiosyncratic volatility puzzle?

• 成果类型: Article
• 署名作者: Hou, Kewei; Loh, Roger K.
• 署名单位: University System of Ohio; Ohio State University; Singapore Management University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2016.02.013
• 发表日期: 2016
• 页码: 167-194
• 关键词: IDIOSYNCRATIC VOLATILITY; Cross-section of stock returns; Lottery preferences; Market frictions

摘要

We propose a simple methodology to evaluate a large number of potential explanations for the negative relation between idiosyncratic volatility and subsequent stock returns (the idiosyncratic volatility puzzle). Surprisingly, we find that many existing explanations explain less than 10% of the puzzle. On the other hand, explanations based on investors' lottery preferences and market frictions show some promise in explaining the puzzle. Together, all existing explanations account for 29-54% of the puzzle in individual stocks and 78-84% of the puzzle in idiosyncratic volatility-sorted portfolios. Our methodology can be applied to evaluate competing explanations for other asset pricing anomalies. (c) 2016 Elsevier B.V. All rights reserved.