Can the portfolio excess growth rate explain the predictive power of idiosyncratic volatility?

被引：0
作者：
Mantilla-Garcia, Daniel [1 ,2 ]
Malagon, Juliana [1 ]
Aldana-Galindo, Julian R. [1 ]
机构：
[1] Univ Los Andes, Sch Management, Calle 21 1-20, Bogota 111711, Colombia
[2] EDHEC Risk Inst, 393-400 Promenade Des Anglais, F-06202 Nice, France
来源：
FINANCE RESEARCH LETTERS | 2022年 / 47卷
关键词：
Idiosyncratic volatility puzzle; Return predictability; Cross-sectional variance; Excess growth rate; RISK; RETURNS; STOCKS;
D O I：
10.1016/j.frl.2021.102577
中图分类号：
F8 [财政、金融];
学科分类号：
0202 ;
摘要：
We unveil a theoretical link between the portfolio excess growth rate (EGR) and two measures of average idiosyncratic volatility (IdVol) and confirm it empirically for the U.S. equity market. We find that the EGR and average IdVol are positively related with subsequent market returns over short horizons. A theoretical analysis of EGR properties explains why the relationship between average IdVol and future portfolio returns changes for different weighting schemes, horizons, and portfolio rebalancing frequencies. Furthermore, it explains why the outperformance of low versus high IdVol portfolios is completely reversed at higher rebalancing frequencies when using equal weights.
引用
收藏
页数：8
相关论文
共 18 条
  • [1] The cross-section of volatility and expected returns
    Ang, A
    Hodrick, RJ
    Xing, YH
    Zhang, XY
    [J]. JOURNAL OF FINANCE, 2006, 61 (01) : 259 - 299
  • [2] High idiosyncratic volatility and low returns: International and further US evidence
    Ang, Andrew
    Hodrick, Robert J.
    Xing, Yuhang
    Zhang, Xiaoyan
    [J]. JOURNAL OF FINANCIAL ECONOMICS, 2009, 91 (01) : 1 - 23
  • [3] Does idiosyncratic risk really matter?
    Bali, TG
    Cakici, N
    Yan, XM
    Zhang, Z
    [J]. JOURNAL OF FINANCE, 2005, 60 (02) : 905 - 929
  • [4] Booth DavidG., 1992, Financial Analysts Journal, V48, P26, DOI DOI 10.2469/FAJ.V48.N3.26
  • [5] Have individual stocks become more volatile? An empirical exploration of idiosyncratic risk
    Campbell, JY
    Lettau, M
    Malkiel, BG
    Xu, YX
    [J]. JOURNAL OF FINANCE, 2001, 56 (01) : 1 - 43
  • [6] Can Growth Options Explain the Trend in Idiosyncratic Risk?
    Cao, Charles
    Simin, Timothy
    Zhao, Jing
    [J]. REVIEW OF FINANCIAL STUDIES, 2008, 21 (06) : 2599 - 2633
  • [7] COMMON RISK-FACTORS IN THE RETURNS ON STOCKS AND BONDS
    FAMA, EF
    FRENCH, KR
    [J]. JOURNAL OF FINANCIAL ECONOMICS, 1993, 33 (01) : 3 - 56
  • [8] Fernholz E. R., 2002, Stochastic Portfolio Theory
  • [9] STOCHASTIC PORTFOLIO THEORY AND STOCK-MARKET EQUILIBRIUM
    FERNHOLZ, R
    SHAY, B
    [J]. JOURNAL OF FINANCE, 1982, 37 (02) : 615 - 624
  • [10] A Model-Free Measure of Aggregate Idiosyncratic Volatility and the Prediction of Market Returns
    Garcia, Rene
    Mantilla-Garcia, Daniel
    Martellini, Lionel
    [J]. JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS, 2014, 49 (5-6) : 1133 - 1165
12