Barinov, Alexander and Chabakauri, Georgy ORCID: 0009-0002-7980-269X (2023) Idiosyncratic volatility, growth options, and the cross-section of returns. Review of Asset Pricing Studies, 13 (4). 653 – 690. ISSN 2045-9920
Text (Idiosyncratic volatility, growth options and the cross-section of returns)
- Accepted Version
Repository staff only until 3 April 2025. Download (4MB) | Request a copy |
Abstract
The value effect and the idiosyncratic volatility (IVol) discount arise because growth firms and high IVol firms beat the CAPM during periods of increasing aggregate volatility (market volatility and average IVol), that makes their risk low. All else equal, growth options' value increases with volatility, an effect that is stronger for high IVol firms, for which growth options take a larger fraction of the firm value and firm volatility responds more to aggregate volatility changes. The factor model with the market factor, the market volatility risk factor, and the average IVol factor explains the value effect and the IVol discount.
Item Type: | Article |
---|---|
Official URL: | https://academic.oup.com/raps |
Additional Information: | © 2023 The Authors |
Divisions: | Finance |
Subjects: | H Social Sciences > HG Finance |
JEL classification: | G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing; Futures Pricing |
Date Deposited: | 21 Nov 2023 11:51 |
Last Modified: | 01 Oct 2024 03:06 |
URI: | http://eprints.lse.ac.uk/id/eprint/120814 |
Actions (login required)
View Item |