Determinants of idiosyncratic volatility: Evidence from the Indian stock market

Impact of Idiosyncratic Volatility on Average Stock Returns: Evidence from Sri Lanka

“…Furthermore, with the presence of empirical evidence on the positive association between average stock returns and idiosyncratic volatility emphasises that investors demand a higher compensation for stocks with higher idiosyncratic volatility. More importantly, this empirical finding of positive association between average stock returns and idiosyncratic volatility is clearly in line with the previous empirical findings such as Kumari et al (2017), Fu (2009), and Pukthuanthong- Le and Visaltanachoti (2009).…”

“…The idiosyncratic volatility has been estimated in different methods and frequencies in the previous studies. For instance, Bali, Engle and Murray (2016) estimate the idiosyncratic volatility on the basis of, one month, three months, six months, twelve months, one year, two years, three years and five years while Kumari et al (2017), Fu (2009), Pukthuanthong- Le and Visaltanachoti (2009) and Xu and Malkiel (2003) estimate the idiosyncratic volatility on a monthly basis. Furthermore, in certain previous studies, one month lagged idiosyncratic volatility has been used to estimate the idiosyncratic volatility (Ang et al, 2006(Ang et al, , 2009Bali & Cakici, 2008;Bali, Engle & Murray, 2016;Malagon et al, 2015).…”

“…On the contrary, while highlighting the theoretical and empirical errors in estimating the idiosyncratic volatility using the one month lagged idiosyncratic volatility, certain scholars suggest the EGARCH technique of Nelson (1991) 5 as a better technique to estimate the idiosyncratic volatility (Kumari et al, 2017;Fu, 2009;Pukthuanthong-Le & Visaltanachoti, 2009). As highlighted by Bali and Cakici (2008), the existence of methodological differences among previous studies led to conflicting arguments and thereby creation of a substantive puzzle in relation to the idiosyncratic volatility.…”

Do Derivative Instruments Increase Firm Risk for Indonesia Non-Financial Companies?

“…SMB = monthly returns of small size portfolios minus the daily returns of large size portfolios. For SMB portfolios are grouped into two by the previous year's market capitalization as Liu et al (2014) and Kumari, Mahakud, and Hiremath (2017). HML = calculated by the high group portfolio minus the small group portfolio as Liu et al (2014) and Kumari et al (2017).…”

“…For SMB portfolios are grouped into two by the previous year's market capitalization as Liu et al (2014) and Kumari, Mahakud, and Hiremath (2017). HML = calculated by the high group portfolio minus the small group portfolio as Liu et al (2014) and Kumari et al (2017). The portfolio is divided into 3 with the previous year's book to market equity into three groups, namely high, medium, and low.…”