Investigating the Behavior of Idiosyncratic Volatility*

Xu, Yexiao; Malkiel, Burton G.

doi:10.1086/377033

Cited by 395 publications

(170 citation statements)

References 29 publications

(20 reference statements)

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“…However, this frequency varies substantially, from 0.70% in the 1950s to 15.23% for the 1990s. The increase in volatility is consistent with the increase in crosssectional variation found by McEnally and Todd (1992) from the 1950's to the 1980's and by Xu and Malkiel (2003) across the US markets from the 1950's to 1998.…”

Section: Data Preliminary Findings and Methodologysupporting

confidence: 80%

Far tail or extreme day returns, mutual fund cash flows and investment behaviour

Burnie¹,

Ridder²

2010

Applied Financial Economics

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This study examines the frequency of extreme trading days and investment behaviour in Sweden. We show that the frequency, as well as the magnitude of extreme trading days has increased over time. We also show that the frequency of extreme trading days in a year is positively correlated to the frequency the preceding year. Furthermore, we show that aggregate cash flows into equity and bond funds are unrelated to risk measured by standard deviation of return. Our findings show that investors, individuals as well as corporations, use simple passive investment strategies and hence, do not believe in market timing or wish to risk capital on capturing far tail or black swan type returns. JEL classification: G11; G14; G32

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Section: Data Preliminary Findings and Methodologysupporting

confidence: 80%

Far tail or extreme day returns, mutual fund cash flows and investment behaviour

Burnie¹,

Ridder²

2010

Applied Financial Economics

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“…The first is ordinary volatility calculated as a standard deviation of stock returns during the estimation period of (-63;-3). As it is possible to divide stock return volatility into components measuring systematic and unsystematic risk and the latter component called the idiosyncratic volatility captures the firm-specific risk better (Xu and Malkiel, 2003), the following idiosyncratic volatility measure is used in some models: Although in the following analysis the volatility measures are calculated over an estimation period of (-63;-3), these measures are highly correlated (pair-wise correlation coefficients were above 0.79) with other volatility measures calculated for shorter pre-announcement periods (-33;-3) and (-23;-3) and also for periods covering both pre-and post-announcement periods (-30;30); (-20;20).…”

Section: Other Control Variablesmentioning

confidence: 99%

Testing for asymmetries in price reactions to quarterly earnings announcements on Tallinn, Riga and Vilnius Stock Exchanges during 2000–2009

Laidroo

Grigaliūnienė

2012

Baltic Journal of Economics

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This paper investigates asymmetries in price reactions to quarterly earnings announcements on Tallinn, Riga and Vilnius Stock Exchanges during [2000][2001][2002][2003][2004][2005][2006][2007][2008][2009]. The results show weak evidence that the reaction to negative earnings news is lower than to positive news. Earnings response coefficients tend to be the largest in recession and lowest in expansion, but in most cases the differences between them are not big enough to be statistically significant. The results indicate some support for overreaction to bad news in expansion and underreaction to good news in recession. However, due to limitations of this paper arising from the naïve earnings expectations models used and differences in results reported using different state of the economy measures, more powerful tests on more developed markets with better data availability are needed to verify reported tendencies. JEL classification codes: G1

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“…Previous studies have found that firm size is positively associated with the level of institutional ownership since institutional investors have a preference for liquid assets. Greater institutional ownership and activities of institutional investors have the effect of increasing the amount of firm-specific information that is incorporated into stock prices (Xu and Malkiel, 2003;Chang and Dong, 2006). On the other hand, however, as in most other emerging markets, many of the larger firms in Turkey form part of some family owned business groups.…”

Section: Analysis Of Resultsmentioning

confidence: 99%

Do Stock Prices in Turkey Reflect Fundamental Information? A Firm-Level Analysis

Rahman¹,

Sadique²,

Chowdhury³

2012

IJEF

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This paper investigates the correspondence between stock prices and firm fundamentals in Turkey. In pursuing our objective, we explore the relationship between firm-specific variation in stock returns and fundamentals in the context of a simple present value framework. We overcome the typical insufficiency of the spans of time-series accounting data in emerging market research, and the consequent loss of statistical testing power, by adopting a firm-level micro panel data approach. After properly accounting for unobserved heterogeneity, potential endogeneity bias and volatility persistence, we find that firm-specific variation of stock returns in Turkey is only weakly correlated with alternative proxies of firm-specific variation in firm fundamentals and that the relationship is not robust to the influence of control variables such as the firm size. Our findings are, therefore, consistent with the usual perception that stock prices in emerging markets contain little firm-specific information.

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Investigating the Behavior of Idiosyncratic Volatility*

Cited by 395 publications

References 29 publications

Far tail or extreme day returns, mutual fund cash flows and investment behaviour

Far tail or extreme day returns, mutual fund cash flows and investment behaviour

Testing for asymmetries in price reactions to quarterly earnings announcements on Tallinn, Riga and Vilnius Stock Exchanges during 2000–2009

Do Stock Prices in Turkey Reflect Fundamental Information? A Firm-Level Analysis

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