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Idiosyncratic volatility
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DOI：10.1016/j.frl.2025.109410.png)
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Abstract
En 中文
• Standard idiosyncratic volatility (IV) measures are fundamentally misspecified. • No traded asset has zero variance return. We identify the true IV measure. • True-versus-standard IV ratio lies in [0,1], implying unbounded measurement errors. • Errors are arbitrary, nonlinear, and nonmonotonic. No econometric fix exists. • Studies using standard IV measures can be severely and unpredictably distorted.
Keywords:
Idiosyncratic volatility
Misspecification
Linear beta pricing
Zero beta pricing
G12
G19
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