IDEAS home Printed from https://ideas.repec.org/a/now/jnlcfr/104.00000126.html
   My bibliography  Save this article

The Fu (2009) Positive Relation Between Idiosyncratic Volatility and Expected Returns is Due to Look-Ahead Bias

Author

Listed:
  • Seongkyu Gilbert Park
  • K. C. John Wei
  • Linti Zhang

Abstract

Expected idiosyncratic volatility (IVOL) and its positive relation to expected returns of Fu (2009) can be closely replicated, but only when we include information up to time t to estimate the IVOL at time t. Since this involves look-ahead bias, we re-estimate expected IVOL using information only up to time t−1. We find no significant relation between IVOL and returns, and our results are robust to the sample periods extended to before and after that of Fu (2009). Our findings are consistent with the fact that idiosyncratic risk is not priced.

Suggested Citation

  • Seongkyu Gilbert Park & K. C. John Wei & Linti Zhang, 2023. "The Fu (2009) Positive Relation Between Idiosyncratic Volatility and Expected Returns is Due to Look-Ahead Bias," Critical Finance Review, now publishers, vol. 12(1-4), pages 57-124, August.
    • Handle: RePEc:now:jnlcfr:104.00000126
    DOI: 10.1561/104.00000126
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1561/104.00000126
    Download Restriction: no
    File URL: https://libkey.io/10.1561/104.00000126?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    Idiosyncratic volatility; Look-ahead bias; EGARCH;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:now:jnlcfr:104.00000126. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lucy Wiseman (email available below). General contact details of provider: http://www.nowpublishers.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.