 Does idiosyncratic volatility matter at the global level?The North American Journal of Economics and Finance, 2019, vol. 47, issue C, 252-268 Abstract: I test the existence of a time-series relationship between the aggregate idiosyncratic volatility and the market index return at the global level by introducing various global measures of aggregate idiosyncratic volatility. I offer four definitions of aggregate global idiosyncratic volatility (GIVOL) based on factor models and two other definitions, which are free from factor models. Regardless of whether I use model-dependent or model-independent measures, I find no evidence of a robust and significant relation between the aggregate GIVOL and the global market return. This result is valid for four different sub-periods and four different subsamples reflecting the different states of the economy and the stock market. It is also robust to the inclusion of several control variables. As global idiosyncratic volatility is not a priced factor in the intertemporal asset pricing framework, the results indicate that international diversification is still effective in eliminating idiosyncratic volatility despite the globalization process. Keywords: Global idiosyncratic volatility; Aggregate idiosyncratic volatility; World market return; International diversification (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:47:y:2019:i:c:p:252-268 DOI: 10.1016/j.najef.2018.12.015 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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