Expected returns and idiosyncratic risk: Industry-level evidence from Russia

Arbeitspapier

​In this paper, we explore a relation between expected returns and idiosyncratic risk. As in many emerging markets, investors in the Russian stock market cannot fully diversify their portfolios due to transaction costs, information gathering and processing costs, and short-comings in investor protection. This implies that investors demand a premium for idiosyncratic risk – unique asset-specific risk plays a role in investment decisions. We estimate the price of idiosyncratic risk using MIDAS regressions and a cross-section of Russian industry portfolios. We find that idiosyncratic risk commands an economically and statistically significant risk premium. The results remain unaffected after controlling for global pricing factors and short-term return reversal.

Object Details

• ISBN: 978-952-323-070-5
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: BOFIT Discussion Papers ; No. 30/2015

Classification and Topics

• Classification: Wirtschaft ; Asset Pricing; Trading Volume; Bond Interest Rates

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kinnunen, Jyri ; Martikainen, Minna
• Event: Veröffentlichung
• (who): Bank of Finland, Institute for Economies in Transition (BOFIT)
• (where): Helsinki
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/212840
• Last update: 10.03.2025, 11:44 AM CET