Abstract

http://ssrn.com/abstract=681343
 
 

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The Cross-Section of Volatility and Expected Returns


Andrew Ang


Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Robert J. Hodrick


Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Yuhang Xing


Rice University

Xiaoyan Zhang


Purdue University - Krannert School of Management


Journal of Finance, Forthcoming

Abstract:     
We examine how volatility risk, both at the aggregate market and individual stock level, is priced in the cross-section of expected stock returns. Stocks that have past high sensitivities to innovations in aggregate volatility have low average returns. We also find that stocks with past high idiosyncratic volatility have abysmally low returns, but this cannot be explained by exposure to aggregate volatility risk. The low returns earned by stocks with high exposure to systematic volatility risk and the low returns of stocks with high idiosyncratic volatility cannot be explained by the standard size, book-to-market, or momentum effects, and are not subsumed by liquidity or volume effects.

Number of Pages in PDF File: 56

Keywords: Systematic risk, stochastic volatility, idiosyncratic volatility

JEL Classification: G12, G13

Accepted Paper Series


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Date posted: April 5, 2005  

Suggested Citation

Ang, Andrew and Hodrick, Robert J. and Xing, Yuhang and Zhang, Xiaoyan, The Cross-Section of Volatility and Expected Returns. Journal of Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=681343

Contact Information

Andrew Ang (Contact Author)
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Robert J. Hodrick
Columbia Business School - Finance and Economics ( 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
Purdue University - Krannert School of Management ( email )
403 WEST STATE STREET
West Lafayette, IN 47907-1310
United States
7654967674 (Phone)
HOME PAGE: http://web.ics.purdue.edu/~zhang654/
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