دانلود رایگان مقاله انگلیسی نوسانات نامتقارن، VIX و بازده سهام - الزویر 2018

ABSTRACT

The interplay between stock returns and idiosyncratic volatility (IVOL) has been subject to extensive empirical investigation, yielding mixed findings. Earlier empirical investigation found either a positive relationship between expected returns and idiosyncratic volatility or none at all, the latter consistent with classical asset pricing theory. Further recent empirical research suggested a negative relationship between the variables. In this study, we use data about US firms from 1990 to 2016 and show that the aggregate market volatility risk, captured by the VIX, plays a role in the relationship between IVOL and stock returns. Specifically, an increase (decline) in the VIX tends to be followed by a negative (positive) relationship between idiosyncratic volatility and future returns, even after taking into account other risk factors. We maintain that an increase in the VIX, also called the investors’ fear gauge, may reflect an increase in investors’ risk aversion, prompting them to balance their portfolios by increasing the diversity of their investments.

5. Conclusion

Previous research has provided contradictory conclusions as to whether idiosyncratic volatility has a positive or negative impact on stock returns. Furthermore, the reasons behind such possible effects are still unclear. Using U.S. data for 1990–2016, we establish that the effect is not constant over time and that it is negatively correlated with changes in the VIX. Our findings indicate that in periods associated with an increase in the VIX, idiosyncratic volatility has a negative effect on future stock returns, while in periods associated with a decrease in the VIX, idiosyncratic volatility has a positive effect on future stock returns. This result suggests that the effect of IVOL on stock returns may not be unidirectional. In other words, claiming that IVOL invariably affects stock returns over time (positively or negatively) may be an oversimplification of a complicated reality. Adopting the view of some of the research literature that the VIX reflects investors’ risk preferences, we raise the possibility that the effect of the VIX on the excess returns of high idiosyncratic volatility stocks over low idiosyncratic volatility stocks may be rooted in investors’ tendency to balance and reduce their portfolios’ volatility. In other words, investors will trade high IVOL stocks for low IVOL stocks. By doing so, they increase the price of the latter, compared to the former, and strengthen the negative relationship between IVOL and returns.