Author(s)

Baohua Zhang ¹

Affiliation(s)

¹ School of Economics/China-Asean Institute of Financial Cooperation, Guangxi University, Nanning, Guangxi, 530004, China

Corresponding Author

Baohua Zhang

ABSTRACT

This paper studies the predictability of the idiosyncratic volatility GAP to the strategic returns of idiosyncratic volatility. Based on the data of A-share listed companies from 2001 to 2021, this paper uses single-factor and multi-factor models to empirically analyze the predictive effect of the idiosyncratic volatility GAP on idiosyncratic volatility strategies. The results show that the puzzle of idiosyncratic volatility does exist in China A-share market, and the idiosyncratic volatility GAP can positively predict the return of the idiosyncratic volatility strategy.

KEYWORDS

Idiosyncratic Volatility GAP, Predictability, Idiosyncratic Volatility Anomaly

CITE THIS PAPER

Baohua Zhang, The Idiosyncratic Volatility Gap and Return Predictability. Financial Engineering and Risk Management (2023) Vol. 6: 118-124. DOI: http://dx.doi.org/10.23977/ferm.2023.060215.

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