Does Idiosyncratic Volatility Matter? New Zealand Evidence

Does Idiosyncratic Volatility Matter? New Zealand Evidence Standard asset pricing models ignore idiosyncratic risk. In this study, we examine if idiosyncratic or unique risk affects returns for New Zealand stocks using the factor portfolio mimicking approach of Fama and French (1993, 1996). We find evidence of a negative relationship between firm size and a stock's idiosyncratic volatility. We also find that high idiosyncratic volatility firms have high betas and generate low earnings on book equity. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Pacific Basin Financial Markets and Policies World Scientific Publishing Company

Does Idiosyncratic Volatility Matter? New Zealand Evidence

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Publisher
World Scientific Publishing Company
Copyright
Copyright ©
ISSN
0219-0915
eISSN
1793-6705
DOI
10.1142/S0219091507001070
Publisher site
See Article on Publisher Site

Abstract

Standard asset pricing models ignore idiosyncratic risk. In this study, we examine if idiosyncratic or unique risk affects returns for New Zealand stocks using the factor portfolio mimicking approach of Fama and French (1993, 1996). We find evidence of a negative relationship between firm size and a stock's idiosyncratic volatility. We also find that high idiosyncratic volatility firms have high betas and generate low earnings on book equity.

Journal

Review of Pacific Basin Financial Markets and PoliciesWorld Scientific Publishing Company

Published: Sep 1, 2007

Keywords: Idiosyncratic volatility asset pricing unique risk JEL Classification: G120 JEL Classification: G150

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