Artikel
Is idiosyncratic risk conditionally priced?
In Merton (1987), idiosyncratic risk is priced in equilibrium as a consequence of incomplete diversification. We modify his model to allow the degree of diversification to vary with average idiosyncratic volatility. This simple recognition results in a state-dependent idiosyncratic risk premium that is higher when average idiosyncratic volatility is low, and vice versa. The data appear to be consistent a positive state-dependent premium for idiosyncratic risk both in the US and other developed markets.
- Language
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Englisch
- Bibliographic citation
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Journal: Quantitative Economics ; ISSN: 1759-7331 ; Volume: 12 ; Year: 2021 ; Issue: 2 ; Pages: 625-646 ; New Haven, CT: The Econometric Society
- Classification
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Wirtschaft
Portfolio Choice; Investment Decisions
Asset Pricing; Trading Volume; Bond Interest Rates
- Subject
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factor models
Idiosyncratic risk
risk premium asset pricing
- Event
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Geistige Schöpfung
- (who)
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Mehra, Rajnish
Wahal, Sunil
Xie, Daruo
- Event
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Veröffentlichung
- (who)
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The Econometric Society
- (where)
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New Haven, CT
- (when)
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2021
- DOI
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doi:10.3982/QE1528
- Handle
- Last update
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10.03.2025, 11:41 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Artikel
Associated
- Mehra, Rajnish
- Wahal, Sunil
- Xie, Daruo
- The Econometric Society
Time of origin
- 2021
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