编号：E-2023-7-1
题目：Good Idiosyncratic Volatility, Bad Idiosyncratic Volatility, and the Cross-Section of Stock Returns
作者：Yunting Liu, Yandi Zhu
联系方式：Yunting Liu, yuntingliu@pku.edu.cn
摘要：We decompose the idiosyncratic volatility of stock returns into “good” and “bad” volatility components, which are associated with positive and negative returns, and estimate a cross-sectional model for expected good minus bad volatility using firm characteristics. Compared to expected idiosyncratic skewness, expected good minus bad volatility not only more accurately measures conditional idiosyncratic skewness, but also yields stronger return predictability. Importantly, the negative relationship between expected good minus bad volatility and future stock returns remains significant when controlling for expected idiosyncratic skewness and exposure to skewness-related factors. Furthermore, the distinction between good and bad volatility provides new evidence on the role that growth options play behind the strong negative relationship between expected good minus bad volatility and stock returns. In particular, our results suggest that growth options earn lower returns mainly because they predict positive idiosyncratic skewness, which is attractive to investors. Although investors may dislike extreme losses more than gains, we do not find it critical to our results.
关键词：idiosyncratic skewness, good volatility, bad volatility, cross-sectional stock returns, risk factors, growth options
