The Cross‐Section of Volatility and Expected Returns

Andrew Ang, Robert Hodrick (), Yuhang Xing and Xiaoyan Zhang ()

Journal of Finance, 2006, vol. 61, issue 1, 259-299

Abstract: We examine the pricing of aggregate volatility risk in the cross‐section of stock returns. Consistent with theory, we find that stocks with high sensitivities to innovations in aggregate volatility have low average returns. Stocks with high idiosyncratic volatility relative to the Fama and French (1993, Journal of Financial Economics 25, 2349) model have abysmally low average returns. This phenomenon cannot be explained by exposure to aggregate volatility risk. Size, book‐to‐market, momentum, and liquidity effects cannot account for either the low average returns earned by stocks with high exposure to systematic volatility risk or for the low average returns of stocks with high idiosyncratic volatility.

Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (1347)

Downloads: (external link)
https://doi.org/10.1111/j.1540-6261.2006.00836.x

Related works:
Working Paper: The Cross-Section of Volatility and Expected Returns (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:61:y:2006:i:1:p:259-299

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().