Arbitrage Asymmetry and the Idiosyncratic Volatility Puzzle

• 成果类型: Article
• 署名作者: Stambaugh, Robert F.; Yu, Jianfeng; Yuan, Yu
• 署名单位: University of Pennsylvania; National Bureau of Economic Research; University of Minnesota System; University of Minnesota Twin Cities; Tsinghua University; Shanghai Jiao Tong University; University of Pennsylvania
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12286
• 发表日期: 2015
• 页码: 1903-1948
• 关键词: cross-section; Investor sentiment; ASSET GROWTH; SHORT SALES; LIMITED ARBITRAGE; COSTLY ARBITRAGE; SHORT-SELLERS; RISK; MARKET; return

摘要

Buying is easier than shorting for many equity investors. Combining this arbitrage asymmetry with the arbitrage risk represented by idiosyncratic volatility (IVOL) explains the negative relation between IVOL and average return. The IVOL-return relation is negative among overpriced stocks but positive among underpriced stocks, with mispricing determined by combining 11 return anomalies. Consistent with arbitrage asymmetry, the negative relation among overpriced stocks is stronger, especially for stocks less easily shorted, so the overall IVOL-return relation is negative. Further supporting our explanation, high investor sentiment weakens the positive relation among underpriced stocks and, especially, strengthens the negative relation among overpriced stocks.