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Erscheinungsjahr: 
2019
Quellenangabe: 
[Journal:] Future Business Journal [ISSN:] 2314-7210 [Volume:] 5 [Issue:] 1 [Publisher:] Springer [Place:] Heidelberg [Year:] 2019 [Pages:] 1-12
Verlag: 
Springer, Heidelberg
Zusammenfassung: 
The present study focused on one of the important South Asian nations-Sri Lanka-to examine the role of idiosyncratic volatility in asset prices. A four-factor model with idiosyncratic volatility was designed for capturing the market, size, value and idiosyncratic risk yields better than Fama and French's (J Financ Econ 33:3-56, 1993) three-factor model and performance of the model. Fama-MacBeth's cross-sectional regression, residual graphs and GRS test all confirm the superiority of four-factor model over 2 three-factor models. For all MC- and IVOL-based portfolios, idiosyncratic volatility is negatively related to the expected returns and positively related for all PB-based portfolios. Finally, study findings confirm that there is a high importance for idiosyncratic volatility risk factor while considering investment decision in Colombo stock exchange. Hence, investor should compensate for holding such risk factors in the portfolio.
Schlagwörter: 
Asset pricing
Idiosyncratic risk
Factor models
Fama-MacBeth' cross-sectional regression
Risk
JEL: 
G12
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