Reinvestigate the Bid-Ask Bounce Effect and Pricing of Idiosyncratic Volatility: The Case of the Australian Market

被引:1
作者
Liu, Bin [1 ]
Tan, Monica [2 ]
Cam, Marie-Anne [2 ]
机构
[1] Univ Wollongong, Sch Accounting Econ & Finance, Wollongong, NSW 2522, Australia
[2] RMIT Univ, Sch Econ Finance & Mkt, Melbourne, Vic 3000, Australia
关键词
Idiosyncratic volatility; asset pricing; bid-ask bounce; liquidity; Australia; LIQUIDITY BIASES; CROSS-SECTION; RISK; RETURNS; EQUILIBRIUM; EQUITY; MATTER; STOCKS;
D O I
10.1142/S0219091519500048
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
We investigate the bid-ask bounce effect on estimation of idiosyncratic volatility (IVOL) from asset pricing perspective using a comprehensive country-specific sample. We find that the idiosyncratic volatility-return relationship remains significant while controlling for stock size. However, the explanatory power of IVOL disappears completely when stock liquidity is controlled for. These findings support our argument that the bid-ask bounce effect on pricing of IVOL is strongly influenced by stock liquidity. Our results indicate that mid-price is the "true" price to measure IVOL of the least liquid stocks in the Australian stock market.
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页数:23
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