Full metadata
Title
A time-varying premium for idiosyncratic risk: its effects on the cross-section of stock returns
Description
Merton (1987) predicts that idiosyncratic risk can be priced. I develop a simple equilibrium model of capital markets with information costs in which the idiosyncratic risk premium depends on the average level of idiosyncratic volatility. This dependence suggests that the idiosyncratic risk premium varies over time. I find that in U.S. markets, the covariance between stock-level idiosyncratic volatility and the idiosyncratic risk premium explains future stock returns. Stocks in the highest quintile of the covariance between the volatility and risk premium earn an average 3-factor alpha of 70 bps per month higher than those in the lowest quintile.
Date Created
2015
Contributors
- Xie, Daruo (Author)
- Wahal, Sunil (Thesis advisor)
- Mehra, Rajnish (Thesis advisor)
- Arizona State University (Publisher)
Topical Subject
Resource Type
Extent
v, 59 p. : col. ill
Language
eng
Copyright Statement
In Copyright
Primary Member of
Peer-reviewed
No
Open Access
No
Handle
https://hdl.handle.net/2286/R.I.29715
Statement of Responsibility
by Daruo Xie
Description Source
Viewed on June 22, 2015
Level of coding
full
Note
thesis
Partial requirement for: Ph.D., Arizona State University, 2015
bibliography
Includes bibliographical references (p. 47-48)
Field of study: Business administration
System Created
- 2015-06-01 08:05:52
System Modified
- 2021-08-30 01:29:54
- 3 years 2 months ago
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