The idiosyncratic volatility anomaly: Corporate investment or investor mispricing?
David Moreno and
Journal of Banking & Finance, 2015, vol. 60, issue C, 224-238
Most of the literature on the idiosyncratic volatility anomaly has focused on plausible explanations for it based on investor preferences, investor irrationality or market characteristics. Surprisingly, the role of asset-pricing models and firm characteristics in the estimation of idiosyncratic risk measures has been largely neglected. Our results suggest that investment and profitability, presumably driven by managers and therefore linked to idiosyncratic risk, are able to account for the anomaly in a cross-section of stock returns. Moreover, we show that this effect is independent and complementary to the effects related to investor preference for skewness.
Keywords: Idiosyncratic risk; Corporate investment; Investor mispricing; Valuation Theory; Accruals; Anomaly; Profitability (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:60:y:2015:i:c:p:224-238
Access Statistics for this article
Journal of Banking & Finance is currently edited by Ike Mathur
More articles in Journal of Banking & Finance from Elsevier
Series data maintained by Dana Niculescu ().