Time-Varying Volatility and the Cross-Section of Equity Returns

A vast literature has documented the value premium and the small firm effect as pervasive stylized facts in empirical asset pricing and yet research has been largely unable to provide entirely convincing explanations of why these phenomena exist.

Author(s) :

Chris Brooks

Professor of Finance, ICMA Centre, University of Reading (UK)

Xiafei Li

Ph.D. student, Cass Business School, City University (UK)

Joelle Miffre

Associate Professor of Finance, EDHEC Business School

Presentation :

This paper demonstrates that the cross-sectional variation in returns between portfolios sorted by size and book-to-market value is significantly and positively related to the conditional volatility of those portfolios. We show that the explanatory power of the portfolios' sensitivities to conditional volatility for the cross-section of returns is in addition to that embodied in the sensitivities to market risk, macroeconomic, book-to-market and market capitalization factors.
Pdf
Time-Varying Volatility and the Cross-Section of Equity Returns...
(1.69 MB)
Type : Working paper
Date : le 09/03/2009
Research Cluster : Finance

See Also

EDHEC consolidates its position as a world-leading school for business and entrepreneurship
- 03-07-2017
Founded by entrepreneurs, EDHEC has embraced the fundamental values of business for...
Station F successfully inaugurated in the presence of Emmanuel Macron and EDHEC
- 29-06-2017
EDHEC announced this May that it had joined Station F, the world’s biggest start-up...
- 22-06-2017
Peter Daly and Dennis Davy, professors at EDHEC Business School specialised in Language...
Financial Times ranking 2017: #1 Master in Finance Worldwide
- 19-06-2017
EDHEC Business School’s Master in Finance tops the Financial Times Masters in Finance...