The recent academic literature in finance has paid considerable attention to idiosyncratic volatility. Campbell et al (2001) and Malkiel and Xu (2002) document that idiosyncratic volatility increased over time. Brandt et al (2009) show that this trend completely reversed itself by 2007, falling below pre-1990s levels.
This suggests the increase in idiosyncratic volatility through the 1990s was not a time trend but rather an “episodic phenomenon”. Bekaert et al (2008) confirm there is no trend for
The week on Risk.net, July 14–20, 2017Receive this by email