Financial distress and idiosyncratic volatility: An empirical investigation

Jing Chen; Loran Chollete; Rina Ray

doi:10.1016/j.finmar.2009.10.003

Financial distress and idiosyncratic volatility: An empirical investigation

Jing Chen, Loran Chollete^*, Rina Ray

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

Abstract

We investigate the link between distress and idiosyncratic volatility. Specifically, we examine the twin puzzles of anomalously low returns for high idiosyncratic volatility stocks and high distress risk stocks, documented by Ang et al. (2006) and Campbell et al. (2008), respectively. We document that these puzzles are empirically connected, and can be explained by a simple, theoretical, single-beta CAPM model. (C) 2009 Elsevier B.V. All rights reserved.

Original language	English
Pages (from-to)	249-267
Number of pages	19
Journal	Journal of International Financial Markets, Institutions and Money
Volume	13
Issue number	2
DOIs	https://doi.org/10.1016/j.finmar.2009.10.003
Publication status	Published - May 2010

Keywords

Distress risk
Idiosyncratic volatility
Single-beta CAPM
RISK
RETURNS
PREDICTION
BANKRUPTCY
EQUITY
RATIOS

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10.1016/j.finmar.2009.10.003

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title = "Financial distress and idiosyncratic volatility: An empirical investigation",

abstract = "We investigate the link between distress and idiosyncratic volatility. Specifically, we examine the twin puzzles of anomalously low returns for high idiosyncratic volatility stocks and high distress risk stocks, documented by Ang et al. (2006) and Campbell et al. (2008), respectively. We document that these puzzles are empirically connected, and can be explained by a simple, theoretical, single-beta CAPM model. (C) 2009 Elsevier B.V. All rights reserved.",

keywords = "Distress risk, Idiosyncratic volatility, Single-beta CAPM, RISK, RETURNS, PREDICTION, BANKRUPTCY, EQUITY, RATIOS",

author = "Jing Chen and Loran Chollete and Rina Ray",

year = "2010",

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AU - Chen, Jing

AU - Chollete, Loran

AU - Ray, Rina

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N2 - We investigate the link between distress and idiosyncratic volatility. Specifically, we examine the twin puzzles of anomalously low returns for high idiosyncratic volatility stocks and high distress risk stocks, documented by Ang et al. (2006) and Campbell et al. (2008), respectively. We document that these puzzles are empirically connected, and can be explained by a simple, theoretical, single-beta CAPM model. (C) 2009 Elsevier B.V. All rights reserved.

AB - We investigate the link between distress and idiosyncratic volatility. Specifically, we examine the twin puzzles of anomalously low returns for high idiosyncratic volatility stocks and high distress risk stocks, documented by Ang et al. (2006) and Campbell et al. (2008), respectively. We document that these puzzles are empirically connected, and can be explained by a simple, theoretical, single-beta CAPM model. (C) 2009 Elsevier B.V. All rights reserved.

KW - Distress risk

KW - Idiosyncratic volatility

KW - Single-beta CAPM

KW - RISK

KW - RETURNS

KW - PREDICTION

KW - BANKRUPTCY

KW - EQUITY

KW - RATIOS

U2 - 10.1016/j.finmar.2009.10.003

DO - 10.1016/j.finmar.2009.10.003

M3 - Article

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SP - 249

EP - 267

JO - Journal of International Financial Markets, Institutions and Money

JF - Journal of International Financial Markets, Institutions and Money

IS - 2

ER -

Financial distress and idiosyncratic volatility: An empirical investigation

Abstract

Keywords

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