Market and idiosyncratic volatility: high frequency dynamics

Nick Taylor

Applied Financial Economics, 2010, vol. 20, issue 9, 739-751

Abstract: The explanatory power of idiosyncratic volatility is examined in the context of the dynamics of market volatility. Results based on high frequency individual Standard & Poor's (S&P) 100 stock data indicate that aggregate idiosyncratic volatility has a significant and persistent impact on market volatility (and vice versa). Furthermore, we show that this explanatory power improves as one increases the number of stocks used to construct idiosyncratic volatility.

Date: 2010
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DOI: 10.1080/09603100903459923

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