Idiosyncratic Risk in Emerging Markets
AbstractIn this study, the properties and portfolio management implications of the value-weighted idiosyncratic volatility in 24 emerging markets are examined. The paper provides evidence against the view that the rise of idiosyncratic risk is a global phenomenon. Furthermore, specific and market risks jointly predict market returns as there is a negative (positive) relation between idiosyncratic (market) risk and subsequent stock returns. Idiosyncratic volatility is the most important component of tracking error volatility and it does not exhibit either an upward or a downward trend. Thus, investors do not have to increase, on an average, the number of stocks that they hold, to keep the active risk constant.
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Bibliographic InfoPaper provided by University of Peloponnese, Department of Economics in its series Working Papers with number 0018.
Length: 37 pages
Date of creation: 2008
Date of revision:
Emerging markets; Idiosyncratic risk; Portfolio management; Tracking error volatility.;
Other versions of this item:
- NEP-ALL-2008-02-02 (All new papers)
- NEP-FMK-2008-02-02 (Financial Markets)
- NEP-RMG-2008-02-02 (Risk Management)
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