Download This PaperThe International Commonality of Idiosyncratic Variances
85 Pages Posted: 11 Jan 2019 Last revised: 27 Jul 2023
Date Written: May 1, 2019
Abstract
We document strong global commonality in country idiosyncratic return variances across
23 developed markets, which is stronger than international return commonality. The global
common factor of idiosyncratic return variances is highly correlated with that of idiosyncratic cash
flow variances, and is also significantly related to variables capturing aggregate discount rate
variation and the conditional market variance. Furthermore, aggregate idiosyncratic return and
cash flow variances are mostly but not always countercyclical.
Keywords: return idiosyncratic variance, cash flow idiosyncratic variance, global commonality, countercyclical, state variables
JEL Classification: F39, G12, G15
Suggested Citation: Suggested Citation
