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   Investment Thoughts - Academia

The memory of stock return volatility: Asset pricing implications


Abstract


We examine long memory volatility in the cross-section of stock returns. We show that long memory volatility is widespread in the United States and that the degree of memory can be related to firm characteristics, such as market capitalization, book-to-market ratio, prior performance, and price jumps. Long memory volatility is negatively priced in the cross-section. Buying stocks with shorter memory and selling stocks with longer memory in volatility generates significant excess returns of 1.71% per annum. Consistent with theory, we find that the volatility of stocks with longer memory is more predictable than stocks with shorter memory. This makes the latter more uncertain, which is compensated for with higher average returns.

 

 

Journal Link

 

 

Journal of Financial Markets, 23 January 2019-Duc Binh Benno Nguyen, Marcel Prokopczuk, Philipp Sibbertsen

04.11.2019


 

Themes

 

Asia

Bonds

Bubbles and Crashes

Business Cycles
Central Banks

China

Commodities
Contrarian

Corporates

Creative Destruction
Credit Crunch

Currencies

Current Account

Deflation
Depression 

Equity
Europe
Financial Crisis
Fiscal Policy

Germany

Gloom and Doom
Gold

Government Debt

Historical Patterns

Household Debt
Inflation

Interest Rates

Japan

Market Timing

Misperceptions

Monetary Policy
Oil
Panics
Permabears
PIIGS
Predictions

Productivity
Real Estate

Seasonality

Sovereign Bonds
Systemic Risk

Switzerland

Tail Risk

Technology

Tipping Point
Trade Balance

U.S.A.
Uncertainty

Valuations

Yield