Country-specific idiosyncratic risk and global equity index returns

C. Hueng and Ruey Yau

International Review of Economics & Finance, 2013, vol. 25, issue C, 326-337

Abstract: Studies have claimed that the “idiosyncratic volatility puzzle” in the firm-level data can be explained by certain time-series properties of the firm-specific shocks. The absence of this puzzle in the country-level index data implies that the time-series properties of the country-specific shocks are different from those of the firm-specific shocks. We find that the differences are, first, lagged idiosyncratic volatility is a better proxy for expected idiosyncratic risk in the country-level data. Second, idiosyncratic skewness is not a significant factor determining country-level index returns. Finally, country-specific index returns show momentum, as opposed to return reversals documented in the firm-level data.

Keywords: Country-specific risk; Idiosyncratic volatility puzzle; International asset pricing (search for similar items in EconPapers)
JEL-codes: G11 G12 G15 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:25:y:2013:i:c:p:326-337

DOI: 10.1016/j.iref.2012.07.014

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