High Idiosyncratic Volatility and Low Returns: International and Further U.S. Evidence

Journal of Financial Economics, Vol. 91, pp. 1-23, January 2008

52 Pages Posted: 21 Oct 2011

See all articles by Andrew Ang

Andrew Ang

BlackRock, Inc

Robert J. Hodrick

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER)

Yuhang Xing

Rice University

Xiaoyan Zhang

Tsinghua University - PBC School of Finance

Multiple version iconThere are 3 versions of this paper

Date Written: 2009

Abstract

Stocks with recent past high idiosyncratic volatility have low future average returns around the world. Across 23 developed markets, the difference in average returns between the extreme quintile portfolios sorted on idiosyncratic volatility is -1:31% per month, after controlling for world market, size, and value factors. The effect is individually significant in each G7 country. In the United States, we rule out explanations based on trading frictions, information dissemination, and higher moments. There is strong covariation in the low returns to high-idiosyncratic-volatility stocks across countries, suggesting that broad, not easily diversifiable factors lie behind this phenomenon.

Suggested Citation

Ang, Andrew and Hodrick, Robert J. and Xing, Yuhang and Zhang, Xiaoyan, High Idiosyncratic Volatility and Low Returns: International and Further U.S. Evidence (2009). Journal of Financial Economics, Vol. 91, pp. 1-23, January 2008 , Available at SSRN: https://ssrn.com/abstract=1946502

Andrew Ang (Contact Author)

BlackRock, Inc ( email )

55 East 52nd Street
New York City, NY 10055
United States

Robert J. Hodrick

Columbia University - Columbia Business School, Finance ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

365 Fifth Avenue, 5th Floor
New York, NY 10016-4309
United States

Yuhang Xing

Rice University ( email )

6100 South Main Street
Houston, TX 7705-1892
United States

Xiaoyan Zhang

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

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