Idiosyncratic volatility and excess Return: Evidence from the Greater China region

Li-Hsun Wang, Chu-Hsiung Lin, Jui-Heng Kang and Hung-Gay Fung

Finance Research Letters, 2016, vol. 19, issue C, 126-129

Abstract: This study uses monthly data from the Greater China region from 1996 to 2010 to examine the relation between idiosyncratic volatility (IV) and excess returns (ER). We show an insignificant IV-ER relation in the Hong Kong and Taiwan stock markets. A positive relation is found in the Shanghai stock market, but the positive relation disappears after the market liberalization in April 2005. Our finding supports Merton's (1987) theory that excess return and idiosyncratic volatility are positively related when asset diversification is restricted.

Keywords: Idiosyncratic volatility; Excess return (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:19:y:2016:i:c:p:126-129

DOI: 10.1016/j.frl.2016.07.003

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