When Stock Idiosyncratic Volatility Works
April 18, 2012 - Volatility Effects
For which stocks does market-adjusted (idiosyncratic) volatility work as an indicator of future returns (see “No Reward for Risk?”)? In their January 2012 paper entitled “Dissecting the Idiosyncratic Volatility Anomaly”, Linda Chen, George Jiang, Danielle Xu and Tong Yao measure the idiosyncratic volatility premium in different subsamples of U.S. stocks. To measure the premium, they focus… Keep Reading