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

Journal of Financial Economics, Vol. 91, pp. 1-23, 2009

52 Pages Posted: 22 Oct 2011 Last revised: 3 Oct 2015

See all articles by Andrew Ang

Andrew Ang

BlackRock, Inc

Robert J. Hodrick

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

Yuhang Xing

Rice University

Xiaoyan Zhang

Tsinghua University - PBC School of Finance

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, 2009 . Available at SSRN: https://ssrn.com/abstract=1947020

Andrew Ang

BlackRock, Inc ( email )

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

Robert J. Hodrick (Contact Author)

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

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
148
Abstract Views
894
rank
205,316
PlumX Metrics