Does Idiosyncratic Risk Really Matter?
Goyal and Santa-Clara (2003) find a significantly positive relation between the equal-weighted average stock volatility and the value-weighted portfolio returns on the NYSE/AMEX/Nasdaq stocks for the period of 1963:08 to 1999:12. We show that this result is driven by small stocks traded on the Nasdaq, and is in part due to a liquidity premium. In addition, their result does not hold for the extended sample of 1963:08 to 2001:12 and for the NYSE/AMEX and NYSE stocks. More importantly, we find no evidence of a significant link between the value-weighted portfolio returns and the median and value-weighted average stock volatility.
Finance and Financial Management | Portfolio and Security Analysis
Journal of Finance
ZHANG, Zhe (Joe); Bali, Turan G.; Cakici, Nusret; and Yan, Xuemin.
Does Idiosyncratic Risk Really Matter?. (2005). Journal of Finance. 60, (2), 905-929. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/1080