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Does idiosyncratic volatility matter in emerging markets? Evidence from China

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  • Nartea, Gilbert V.
  • Wu, Ji
  • Liu, Zhentao
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    Abstract

    We investigate the time series behavior of idiosyncratic volatility and its role in asset pricing in China. We find no evidence of a long-term trend in the time series behavior of idiosyncratic volatility. Idiosyncratic volatility in China is best characterized by an autoregressive process with regime shifts that coincide with structural market reforms. We also document evidence of a negative idiosyncratic volatility effect in China with anecdotal evidence suggesting that it could be driven by investor preference for high idiosyncratic volatility stocks.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

    Volume (Year): 27 (2013)
    Issue (Month): C ()
    Pages: 137-160

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    Handle: RePEc:eee:intfin:v:27:y:2013:i:c:p:137-160

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    Web page: http://www.elsevier.com/locate/intfin

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    Keywords: Idiosyncratic volatility; Regime-switching; Emerging markets; China;

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