Does Idiosyncratic Volatility Matter? New Zealand Evidence
Author(s)
Drew, ME
Marsden, A
Veeraraghavan, M
Griffith University Author(s)
Year published
2007
Metadata
Show full item recordAbstract
Standard asset pricing models ignore idiosyncratic risk. In this study, we examine if idiosyncratic or unique risk affects returns for New Zealand stocks using the factor portfolio mimicking approach of Fama and French (1993, 1996). We find evidence of a negative relationship between firm size and a stock's idiosyncratic volatility. We also find that high idiosyncratic volatility firms have high betas and generate low earnings on book equity.Standard asset pricing models ignore idiosyncratic risk. In this study, we examine if idiosyncratic or unique risk affects returns for New Zealand stocks using the factor portfolio mimicking approach of Fama and French (1993, 1996). We find evidence of a negative relationship between firm size and a stock's idiosyncratic volatility. We also find that high idiosyncratic volatility firms have high betas and generate low earnings on book equity.
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Journal Title
Review of Pacific Basin Financial Markets and Policies
Volume
10
Issue
3
Publisher URI
Subject
Banking, finance and investment
Banking, finance and investment not elsewhere classified