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The Cross-Section of Volatility and Expected Returns
TLDR
This paper examined the pricing of aggregate volatility risk in the cross-section of stock returns and found that stocks with high sensitivities to innovations in aggregate volatility have low average returns, and that stock with high idiosyncratic volatility relative to the Fama and French (1993) model have abysmally low return.Abstract:
We examine the pricing of aggregate volatility risk in the cross-section of stock returns Consistent with theory, we find that stocks with high sensitivities to innovations in aggregate volatility have low average returns In addition, we find that stocks with high idiosyncratic volatility relative to the Fama and French (1993) model have abysmally low average returns This phenomenon cannot be explained by exposure to aggregate volatility risk Size, book-to-market, momentum, and liquidity effects cannot account for either the low average returns earned by stocks with high exposure to systematic volatility risk or for the low average returns of stocks with high idiosyncratic volatilityread more
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Cross -section of equity returns: Stock market volatility and priced factors
TL;DR: In this article, the authors discuss the nature of risk valid factors should represent and explain why empirically well-established factors contain information about future changes in the investment opportunity set and that is why these factors are strongly priced across assets.
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Intertemporal CAPM with Conditioning Variables
TL;DR: In this paper, the authors derived and tested an ICAPM based on a conditional version of the two-beta ICAPm (bad beta, good beta, BBGB) from Campbell and Vuolteenaho (2004).
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Volatility and the Buyback Anomaly
Theodoros Evgeniou,Enric Junqué de Fortuny,Enric Junqué de Fortuny,Nick Nassuphis,Theo Vermaelen +4 more
TL;DR: This paper found that post-buyback announcement long-term abnormal returns are higher when the pre-announcement (idiosyncratic) volatility is high, consistent with the low volatility anomaly.
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Disagreement in Economic Forecasts and Equity Returns: Risk or Mispricing?
TL;DR: In this paper, the authors estimate individual stock exposure to an economic disagreement index and show that stocks in the lowest disagreement beta decile generate 6% more annual returns compared to stocks with positive disagreement beta.
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Idiosyncratic Volatility, Conditional Liquidity and Stock Returns
TL;DR: This article showed that negative idiosyncratic risk -expected returns relation is not pervasive over time, and provided a plausible explanation for its time-varying nature, and suggested that following recessions, the conditional pricing of liquidity creates a correction in prices of the high idiosyncratic volatility stocks that persists up to 10 months.
References
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The Capital Asset Pricing Model: Some Empirical Tests
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Liquidity Risk and Expected Stock Returns
TL;DR: This article investigated whether market-wide liquidity is a state variable important for asset pricing and found that expected stock returns are related cross-sectionally to the sensitivities of returns to fluctuations in aggregate liquidity.