A4 Conference proceedings

Time-Varying Idiosyncratic Volatility, inter-listing and Value Premium: Evidence from Canadian Market


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Publication Details
Authors: Ahmed Sheraz, Khorsand Bardia
Publication year: 2014
Language: English
Title of parent publication: Proceedings of the Annual Global Finance Conference
JUFO-Level of this publication: 0
Open Access: Open Access publication

Abstract
This paper attempts to shed more light on the anomalous behavior of value stocks in a thinly traded market such as Canadian market. Both static and time-varying CAPM and CAPM with GJR-GARCH(1,1)-M with time varying idiosyncratic risk models are employed to hold both firm-specific and systematic risk responsible for outperformance of value stocks. The results suggest that standard CAPM with both static and time-varying beta fails to capture the idiosyncratic part of the returns in value portfolios and value premium (value-growth). However when CAPM is used within standard GARCH and GJR-GARCH(1,1)-M specifications then there is an indication that the returns on value portfolio and value premium can be partially explained by time-varying idiosyncratic risk. Moreover, unprecedented approach to divide data sample into non-interlisted stocks is pursued to form a more homogenous sample which suffers less from spurious effects.

Last updated on 2017-22-03 at 14:14