Idiosyncratic Volatility Covariance and Expected Stock Returns

Material TypeArticleLanguageEnglish
TitleIdiosyncratic Volatility Covariance and Expected Stock Returns Author(S)David R. Peterson (Author)
Abstract  Given that the idiosyncratic volatility (IDVOL) of individual stocks co-varies, we develop a model to determine how aggregate idiosyncratic volatility (AIV) may affect the volatility of a portfolio with a finite number of stocks. In portfolio and cross-sectional tests, we find that stocks whose returns are more correlated with AIV innovations have lower returns than those that are less correlated with AIV innovations. ...Paginationp 517-536
Journal TitleFinancial management  
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