The Cross-Section of Volatility and Expected Returns

Andrew Ang, Robert Hodrick (), Yuhang Xing and Xiaoyan Zhang ()

No 10852, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine the pricing of aggregate volatility risk in the cross-section of stock returns. Consistent with theory, we find that stocks with high sensitivities to innovations in aggregate volatility have low average returns. In addition, we find that stocks with high idiosyncratic volatility relative to the Fama and French (1993) model have abysmally low average returns. This phenomenon cannot be explained by exposure to aggregate volatility risk. Size, book-to-market, momentum, and liquidity effects cannot account for either the low average returns earned by stocks with high exposure to systematic volatility risk or for the low average returns of stocks with high idiosyncratic volatility.

JEL-codes: G12 G13 (search for similar items in EconPapers)
Date: 2004-10
New Economics Papers: this item is included in nep-fin
Note: AP
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Citations: View citations in EconPapers (15)

Published as Ang, Andrew, Robert J. Hodrick, Yuhang Xing and Xiaoyan Zhang. "The Cross-Section Of Volatility and Expected Returns," Journal of Finance, 2006, v61(1,Feb), 259-299.

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Journal Article: The Cross‐Section of Volatility and Expected Returns (2006)
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