Please boost your Plan to download papers

#
The Idiosyncratic Volatility Anomaly

Essay

Finance & Accounting

Pages 6 (1506 words)

The Idiosyncratic Volatility Anomaly BY YOU YOUR SCHOOL INFO HERE DATE HERE The Idiosyncratic Volatility Anomaly The Idiosyncratic Volatility Anomaly (IVOL) refers to the market risk of price changes occurring in a specific common stock security, as it relates to aggregate risk assessments by investors…

Get more done in less time

Let us write a custom essay on your topic

“The Idiosyncratic Volatility Anomaly” with a personal 15% discount.

Order now
## Introduction

Investors look to these corporate-level indicators when determining the most viable security purchase that will facilitate effective returns and minimize risk of volatility. The IVOL comes into play when a specific security does not conform to known economic models that illustrate either inverse relationships to tangible corporate level characteristics or direct relationships to known securities in a comparable category. Various factor-model equations have been developed to establish the expected rate of return of a security, utilising complex variables such as known excess stock returns, known sensitivities to volatility risk, and certain conditional market means (averages). Consider the complexity of one such factor-model calculation to determine expected security return: Exhibit 1: Factor-Model Calculation to Determine Expected Aggregate Returns Source: Ang, et al. (2006). The cross-section of volatility and expected returns. The interchangeable variables within similar equation modelling dictate no elongated explanation of the complexity of this scientific approach to aggregate security returns. However, such models that determine not only future stock returns, but also volatility risk with a specific security or basket of securities in comparable industries, are designed to facilitate more effective and profitable security investment. ...

Download paper
Not exactly what you need?

### Related papers

How much volatility is the Saudi Arabian petrochemical industry exposed to
Saudi Arabia is intrinsically dependent upon petroleum and petrochemical industry for its revenues and income. The nation’s huge oil reserves have assisted it in getting developed as one of the largest producers and exporters of petroleum and petrochemical goods. Precisely, the nation accounts for 20 percent of global petroleum reserves in the world and exports US$ 157.41 billion worth of the…

Calendar Anomalies: Definition and Background Information
454). Although it was only recently that substantial studies were devoted to look seriously and closely into this phenomenon, calendar anomalies have always been regarded as part of the market folklore. As early as the 1930s, a few studies had already broached the idea of seasonal effects (Jacobs & Levy, p. 135).
…

The theoretical rationale for the NPV approach to investment appraisal
383). It is originally attributed to Irving Fisher in his 1930 book, The Theory of Interest. The most common application of the Fisher model of NPV is in deriving the value of the net contribution of a potential investment to shareholder value, or for budgeting purposes, when deciding among alternative projects when available capital is limited and may not be sufficient to finance all the…

Forecasting Crude Oil (Spot Price) Volatility
Daily prices for crude oils are effective in volatility forecasting. 17 It was also imperative to use the two cluster analysis in the paper. 17 In the case of GARCH to obtain the unknowns the formula was applied where the initial value Xk was taken to be 25.56 where a= 0.001 (fixed) 17 b= 0.00 18 c= 0.00 18 In using the same formula the values for a, b and c were P-GARCH established to be 18 a=…

International Finance. Currency Momentum Strategies
2. Summary of the article Using time series data of more than 34 years, the paper has examined some important aspects of FX momentum. The article provides an in-depth analysis of the unsystematic and systematic risks, comparing different momentum strategies, describing the importance of transaction costs, sources for non-standard momentum, over and under reaction and the arbitrage limits. The…

International comparisons of stock market volatility
Even researchers and practitioners have made modeling of stock volatility a subject of empirical and theoretical study. Historically, stock market volatility is approximately 20% per annum and 5.8% per month even though periods of high and low volatilities are experienced. During the financial crisis, there was a 50 percent drop in stock prices. The effects of the crisis are still being felt due…