Idiosyncratic Volatility and Expected Stock Returns: Evidence from Thailand

Pithak Srisuksai ()
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Pithak Srisuksai: Doctor of Philosophy Program in Economics, School of Economics, University of the Thai Chamber of Commerce, Bangkok, Thailand

Applied Economics Journal, 2012, vol. 19, issue 2, 66-89

Abstract: This paper demonstrates the finding that time-varying expected idiosyncratic volatility has a significant and positive effect on expected stock returns for individual stocks as well as stock sectors. The positive relation remains after controlling for liquidity variables. The second finding is that time-varying expected market volatility has a significant effect on expected stock returns for both individual stocks and stock sectors, which is consistent with the traditional capital asset pricing model. Although the models control for liquidity variables, the significantly positive relation still exists. In addition, expected idiosyncratic volatility plays a more important role than expected market volatility in determining expected stock returns in the case of individual stocks. In contrast, expected market volatility plays a more important role than expected idiosyncratic volatility in the case of stock sectors.

Keywords: idiosyncratic volatility; market volatility; liquidity; expected stock return (search for similar items in EconPapers)
JEL-codes: C33 G12 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:aej:apecjn:v:19:y:2012:i:2:p:66-89

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