High Idiosyncratic Volatility and Low Returns: International and Further U.S. Evidence

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

No 13739, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Stocks with recent past high idiosyncratic volatility have low future average returns around the world. Across 23 developed markets, the difference in average returns between the extreme quintile portfolios sorted on idiosyncratic volatility is -1.31% per month, after controlling for world market, size, and value factors. The effect is individually significant in each G7 country. In the U.S., we rule out explanations based on trading frictions, information dissemination, and higher moments. There is strong comovement in the low returns to high idiosyncratic volatility stocks across countries, suggesting that broad, not easily diversifiable, factors may lie behind this phenomenon.

JEL-codes: F3 G12 G15 (search for similar items in EconPapers)
Date: 2008-01
New Economics Papers: this item is included in nep-rmg
Note: AP
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Citations: View citations in EconPapers (23)

Published as Ang, Andrew & Hodrick, Robert J. & Xing, Yuhang & Zhang, Xiaoyan, 2009. "High idiosyncratic volatility and low returns: International and further U.S. evidence," Journal of Financial Economics, Elsevier, vol. 91(1), pages 1-23, January.

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