Idiosyncratic Volatility and Global Equity Markets
Posted: 29 Jan 2015
Date Written: October 6, 2014
This article investigates the relation of Idiosyncratic Volatility (IVOL) and future returns on a portfolio level in global equity markets. In contrast to previous studies (Ang et al. 2006, 2009), it reveals that the spread between stock indices exhibiting a high IVOL and stock indices with low IVOL is positive and unrelated to movements in the business cycle. Traditional asset pricing models cannot explain the spread.
Keywords: Idiosyncratic Volatility, global equity markets, international stock indices, business cycle
JEL Classification: G12, G14
Suggested Citation: Suggested Citation