Strategic Risk Shifting and the Idiosyncratic Volatility Puzzle: An Empirical Investigation

• 成果类型: Article
• 署名作者: Chen, Zhiyao; Strebulaev, Ilya A.; Xing, Yuhang; Zhang, Xiaoyan
• 署名单位: Chinese University of Hong Kong; Stanford University; National Bureau of Economic Research; Rice University; Tsinghua University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2020.3593
• 发表日期: 2021
• 页码: 2751-2772
• 关键词: risk shifting; Agency conflicts; idiosyncratic volatility puzzle

摘要

We find strong empirical support for the risk-shifting mechanism to account for the puzzling negative relation between idiosyncratic volatility and future stock returns. First, equity holders take on investments with high idiosyncratic risk when their firms are in distress and receive less monitoring from institutional holders as well as when the aggregate economy is in a bad state. Second, the strategically increased idiosyncratic volatility decreases equity betas, particularly in bad states when the market risk premium is high. The negative covariance between the equity beta and the market risk premium causes low and negative returns and alphas in firms with high idiosyncratic volatility.