Financial distress and idiosyncratic volatility: An empirical investigation

Jing Chen, Loran Chollete*, Rina Ray

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    24 Citations (Scopus)

    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 languageEnglish
    Pages (from-to)249-267
    Number of pages19
    JournalJournal of International Financial Markets, Institutions and Money
    Volume13
    Issue number2
    DOIs
    Publication statusPublished - May 2010

    Keywords

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

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