| Summary: | 碩士 === 國立中央大學 === 產業經濟研究所 === 97 === In this paper, we use the idiosyncratic variance and stock market variance jointly forecast Taiwan stock market excess returns. We construct value-weighted and equal-weighted average idiosyncratic variance, and then compare their impact on the results.
Our empirical results show that the idiosyncratic variance and stock market variance can jointly forecast Taiwan stock market excess returns, but stock market variance alone does not. The performances from different ways to calculate the idiosyncratic variance are the same in the in-sample forecasts. However, if the out-of-sample periods to be retained are longer , value-weighted average idiosyncratic variance will be better than equal-weighted idiosyncratic variance in the out-of-sample forecasts.
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