The DOI matches its Crossref record; 118 of the 118 references it cites were found in a registry or an index.
Arbitrage Asymmetry and the Idiosyncratic Volatility Puzzle
Abstract
Buying is easier than shorting for many equity investors. Combining this arbitrage asymmetry with the arbitrage risk represented by idiosyncratic volatility (IVOL) explains the negative relation between IVOL and average return. The IVOL‐return relation is negative among overpriced stocks but positive among underpriced stocks, with mispricing determined by combining 11 return anomalies. Consistent with arbitrage asymmetry, the negative relation among overpriced stocks is stronger, especially for stocks less easily shorted, so the overall IVOL‐return relation is negative. Further supporting our explanation, high investor sentiment weakens the positive relation among underpriced stocks and, especially, strengthens the negative relation among overpriced stocks.
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Cited by
Stambaugh, R. F., & Yuan, Y. (2017) · The Review of Financial Studies · doi:10.1093/rfs/hhw107 · Cited by 894
Self-citationMachine Learning vs. Economic Restrictions: Evidence from Stock Return Predictability
Avramov, D., Cheng, S., & Metzker, L. (2023) · Management Science · doi:10.1287/mnsc.2022.4449 · Cited by 217
Bollerslev, T., Li, S. Z., & Todorov, V. (2016) · Journal of Financial Economics · doi:10.1016/j.jfineco.2016.02.001 · Cited by 180
ESG Preference, Institutional Trading, and Stock Return Patterns
Cao, J., Titman, S., Zhan, X., & Zhang, W. (2023) · Journal of Financial and Quantitative Analysis · doi:10.1017/s0022109022000916 · Cited by 178
Machine Learning Versus Economic Restrictions: Evidence from Stock Return Predictability
Avramov, D., Cheng, S., & Metzker, L. (2019) · SSRN Electronic Journal · doi:10.2139/ssrn.3450322 · Cited by 74
Metadata
- Authors
- STAMBAUGH, R. F., YU, J., & YUAN, Y.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 2015-09-03
- Volume
- 70
- Issue
- 5
- Pages
- 1903-1948
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W3125984145
- Cited by
- 940
- References
- 118
- FWCI
- 127.92
- Type
- journal article
- Language
- en
- Open access
- closed
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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