The International Commonality of Idiosyncratic Variances

Geert Bekaert, Xue Wang and Xiaoyan Zhang ()

No 18230, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We document strong global commonality in country idiosyncratic return variances across 23 developed markets, which is stronger than international return commonality. The global common factor of idiosyncratic return variances is highly correlated with that of idiosyncratic cash flow variances, and is also significantly related to variables capturing aggregate discount rate variation and the conditional market variance. Furthermore, aggregate idiosyncratic return and cash flow variances are predominantly but not always countercyclical.

JEL-codes: F39 G12 G15 (search for similar items in EconPapers)
Date: 2023-06
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