Idiosyncratic return volatility and the role of firm fundamentals: A cross-country analysis

Ali Ebrahim Nejad and Saeid Hoseinzade

Global Finance Journal, 2021, vol. 50, issue C

Abstract: We investigate the relation between fundamental idiosyncratic volatility and stock returns idiosyncratic volatility using data from 56 countries. We find a strong positive relation between fundamental idiosyncratic volatility and idiosyncratic volatility of returns. This association, however, seems to be entirely concentrated in the developed economies, and we find no effect in the emerging markets. Specifically, fundamental idiosyncratic volatility does not lead to more idiosyncratic return volatility in countries with poor legal institutions and weak shareholder protection laws.

Keywords: Idiosyncratic volatility; Cash flow; Comovement; International markets; Investor protection; Institutions (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:50:y:2021:i:c:s104402832100065x

DOI: 10.1016/j.gfj.2021.100667

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