Abstract
This paper examines the idiosyncratic volatility (IV) puzzle in the Indian stock market for the period 1999–2014. Univariate and bivariate sorting, as well as cross-section regressions, suggest a p...
Highlights
The question of whether idiosyncratic volatility is a priced factor is important
There is no in-depth study that has examined the idiosyncratic volatility (IV) puzzle in detail for the Indian stock market, Indian stock market has been part of three multi-market studies. It provides new and detailed results on the relation between stock returns and IV in the context of the Indian stock market; Second, using quantile regressions (Koenker & Bassett, 1978), this study shows that even if a predictor variable is insignificant in the least square (LS) regressions it may be significant at extreme quantiles of the conditional distribution and the sign of the coefficient may be of opposite signs at the extreme quantiles
In this study, we examined the relationship between IV and stock returns in the Indian stock market
Summary
The question of whether idiosyncratic volatility is a priced factor is important. In the framework of classical asset pricing model of Sharpe (1964) and Lintner (1965), idiosyncratic volatility is irrelevant. Tariq Aziz is working as an assistant professor at Department of Business Administration, Aligarh Muslim University, India. His doctoral thesis was on asset pricing anomalies in the Indian stock market. His areas of research interests lie in asset pricing and behavioural finance. Valeed Ahmad Ansari is working as a professor at Department of Business Administration, Aligarh Muslim University, India. He has more than 27 years of research and teaching experience. His research interests lie in asset pricing, behavioural finance and Islamic banking and finance
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