| Summary: | 碩士 === 國立交通大學 === 財務金融研究所 === 107 === In this paper, we evaluate comprehensive potential explanations to date for the negative relation between idiosyncratic volatility (IVOL) and stocks return. Except for traditional variable (Market Friction and Lottery preference) and model, we also include recently found explanations such as Bitcoin Sensitivity and Corporate Social Responsibility. The methodology we apply provide quantified fraction allow us to make a direct comparison. Many candidate variables individually explain less than 10% of the puzzle.
Although CSR and Bitcoin Sensitivity fail to explain IVOL-return relation, we still find something linked to IVOL. For those firms without CSR data, the IVOL effect and explanatory power of candidates is higher due to low transparency. Besides, IVOL effect will be weakened once the company is incorporated in CSR watch list. Firms with low Bitcoin Sensitivity tends to have low IVOL effect for its speculative nature. In addition, we also find that IVOL-return relation is weaker in recent year.
In sum, Market Friction, Lottery Preference, Analyst and CSR explained 17.75%, 16.75%, 9.83% and 12.86% of the puzzle respectively. Transactional friction contributes significantly to the puzzle. Besides, we find that CSR and Bitcoin Sensitivity are worthy of consideration in asset pricing model.
|
|---|
