Intangible factor and idiosyncratic volatility puzzles

Xing Li, Keqiang Hou and Chao Zhang

Finance Research Letters, 2020, vol. 34, issue C

Abstract: In this paper, we explore whether intangible capital (IC) can help explain idiosyncratic volatility puzzles. The underlying assumption is that firms produce and accumulate IC as part of their normal operations. Investments in IC can either raise a company's future ability to produce or lower its cost of production. The applied model finds empirical support for the hypothesis that IC can help explain idiosyncratic volatility puzzles, especially for firms with higher IC-to-total asset ratios. This paper contributes to existing literature on idiosyncratic volatility puzzles from an IC investment perspective and provides implications for IC on stock markets.

Keywords: Intangible capital; Idiosyncratic volatility puzzle; DSGE model; Fama–Macbeth regression (search for similar items in EconPapers)
JEL-codes: E37 G11 O32 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:34:y:2020:i:c:s154461231930875x

DOI: 10.1016/j.frl.2019.101403

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