Idiosyncratic risk and stock returns: a quantile regression approach

Tariq Aziz () and Valeed Ahmad Ansari ()
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Tariq Aziz: Department of Business Administration, Aligarh Muslim University
Valeed Ahmad Ansari: Department of Business Administration, Aligarh Muslim University
Authors registered in the RePEc Author Service: Tariq Aziz Aziz and Tariq Aziz

No 3205769, Proceedings of Economics and Finance Conferences from International Institute of Social and Economic Sciences

Abstract: The relation between idiosyncratic risk and stock returns is currently a topic of debate in the academic literature. So far the evidence regarding the relation is mixed. This study aims to investigate the cross-sectional relation between idiosyncratic risk and stock returns in the Indian stock market employing quantile regressions. Using quantile regressions, this study demonstrates that idiosyncratic volatility and stock returns relation is quantile dependent. The relation between idiosyncratic volatility and stock returns is parabolic. The high idiosyncratic risk is associated with high (low) excess returns at the upper (lower) quantile of the conditional distribution. This partially explains the inconclusive evidence on the idiosyncratic volatility and the stock returns relation in the literature.

Keywords: idiosyncratic volatility; quantile regression; asset pricing; emerging markets; India, (search for similar items in EconPapers)
JEL-codes: C14 C21 G12 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2016-03
New Economics Papers: this item is included in nep-fmk and nep-rmg
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Published in Proceedings of the Proceedings of the 5th Economic & Finance Conference, Miami, Mar 2016, pages 3-11

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Persistent link: https://EconPapers.repec.org/RePEc:sek:iefpro:3205769

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