Accessibility navigation


Idiosyncratic volatility and the pricing of poorly-diversified portfolios

Miffre, J., Brooks, C. and Li, X. (2013) Idiosyncratic volatility and the pricing of poorly-diversified portfolios. International Review of Financial Analysis, 30. pp. 78-85. ISSN 1057-5219

[img]
Preview
Text - Accepted Version
· Please see our End User Agreement before downloading.

414kB

To link to this item DOI: 10.1016/j.irfa.2013.05.007

Abstract/Summary

This article examines the role of idiosyncratic volatility in explaining the cross-sectional variation of size- and value-sorted portfolio returns. We show that the premium for bearing idiosyncratic volatility varies inversely with the number of stocks included in the portfolios. This conclusion is robust within various multifactor models based on size, value, past performance, liquidity and total volatility and also holds within an ICAPM specification of the risk–return relationship. Our findings thus indicate that investors demand an additional return for bearing the idiosyncratic volatility of poorly-diversified portfolios.

Item Type:Article
Refereed:Yes
Divisions:Henley Business School > ICMA Centre
ID Code:36098
Publisher:Elsevier

Downloads

Downloads per month over past year

University Staff: Request a correction | Centaur Editors: Update this record

Page navigation