Does idiosyncratic volatility matter? New Zealand evidence

Michael E. Drew, Alastair Marsden, Madhu Veeraraghavan*

*Corresponding author for this work

Research output: Contribution to journalArticle

12 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)289-308
Number of pages20
JournalReview of Pacific Basin Financial Markets and Policies
Volume10
Issue number3
DOIs
Publication statusPublished - Sep 2007

Keywords

  • Asset pricing
  • Idiosyncratic volatility
  • Unique risk

Fingerprint Dive into the research topics of 'Does idiosyncratic volatility matter? New Zealand evidence'. Together they form a unique fingerprint.

  • Cite this