Idiosyncratic Risk and Stock Returns: A Quantile Regression Approach

Proceedings of the 5th Economics & Finance Conference, Miami, pp. 3-11, 2016

9 Pages Posted: 15 Mar 2016

See all articles by Tariq Aziz

Tariq Aziz

Aligarh Muslim University (AMU) - Department of Business Administration; Aligarh Muslim University (AMU), Faculty of Management Studies and Research, Students

Valeed Ahmad Ansari

Aligarh Muslim University (AMU) - Department of Business Administration

Date Written: February 9, 2016

Abstract

The relation between idiosyncratic risk and stock returns is currently a topic of debate in the academic literature. So far the evidence regarding the relation is mixed. This study aims to investigate the cross-sectional relation between idiosyncratic risk and stock returns in the Indian stock market employing quantile regressions. Using quantile regressions, this study demonstrates that idiosyncratic volatility and stock returns relation is quantile dependent. The relation between idiosyncratic volatility and stock returns is parabolic. The high idiosyncratic risk is associated with high (low) excess returns at the upper (lower) quantile of the conditional distribution. This partially explains the inconclusive evidence on the idiosyncratic volatility and the stock returns relation in the literature.

Keywords: idiosyncratic volatility, quantile regression, asset pricing, emerging markets, India

JEL Classification: G12, C14, C21

Suggested Citation

Aziz, Tariq and Aziz, Tariq and Ansari, Valeed Ahmad, Idiosyncratic Risk and Stock Returns: A Quantile Regression Approach (February 9, 2016). Proceedings of the 5th Economics & Finance Conference, Miami, pp. 3-11, 2016, Available at SSRN: https://ssrn.com/abstract=2747069

Tariq Aziz (Contact Author)

Aligarh Muslim University (AMU) - Department of Business Administration ( email )

Aligarh
India

Aligarh Muslim University (AMU), Faculty of Management Studies and Research, Students ( email )

India

Valeed Ahmad Ansari

Aligarh Muslim University (AMU) - Department of Business Administration ( email )

Aligarh
India

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