Prospect theory value and idiosyncratic volatility: Evidence from the Korean stock market

Nguyen Truong Son and Nhat Minh Nguyen

Journal of Behavioral and Experimental Finance, 2019, vol. 21, issue C, 113-122

Abstract: In this paper, we considered the impact of prospect theory value, as shown in Barberis et al. (2016), regarding the relationship between idiosyncratic volatility and future returns in the Korean stock market, from July, 2000 to June, 2016. We found a positive relationship between prospect theory values and future returns, and notably, the negative relationship between idiosyncratic volatility and future returns is driven by prospect theory value levels, especially negative ones. This finding are robust after controlling for several factors, such as market beta, return reversals, momentum, liquidity, coskewness, and idiosyncratic skewness.

Keywords: Prospect theory value; Idiosyncratic volatility; Realized idiosyncratic volatility; Expected idiosyncratic volatility (search for similar items in EconPapers)
JEL-codes: G10 G11 G40 G41 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:21:y:2019:i:c:p:113-122

DOI: 10.1016/j.jbef.2018.11.006

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