The cross-section of volatility and expected returns

0 / 5. 0

The cross-section of the volatility and expected returns The main research question revolves around determining the rank of the stochastic volatility of the marked is in terms of its price within the cross section of expected returns. Basically, the question tries to determine whether the volatility state of the market is priced in a risky manner so that the price of the aggregate volatility risk can be calculated. Frequently, there has been much estimation regarding the possibility of any market to have a negative or positive price risk on the market volatility. Another vital question is examining the cross-sectional relationship between the expected returns as well as the idiosyncratic volatility (Ang et al., 2006). The questions may fall in different dynamics in regard to the context of the market that has to be explained. Despite the fact that volatility is an unknown variable, it is also clear that there are other stock and return market factors that are variable. In order for the question to be addressed properly, it is important therefore to set constant measures. It is discovered that innovations that occur in aggregate volatility usually carry a comprehensive negative price risk that is usually estimated at -1% per year. There are many reasons according to the economic theory that explains the reason the price of risk of the innovations within the market volatility is negative. It was also found that creating portfolios through mostly sorting the idiosyncratic volatility usually provides no difference in the average returns (Ang et al., 2006). Both results were based on the evaluation of variables established for the study to tally the aggregate volatility

Free The cross-section of volatility and expected returns Essay Sample

Related samples

Zika virus: Transmission form Introduction The Zika virus belongs to the Flaviviradae family, was found for the first time in a monkey called Rhesus febrile and in...

Zika virus: cases and prevention Introduction The World Health Organization (WHO) has confirmed that Zika is a virus caused through the mosquito bite which is...

Zeus The King of Greek mythology Introduction Zeus is the Olympic God of heaven and thunder, the king of all other gods and men and, consequently, the main figure...

Zeus's punishment to Prometheus Introduction Prometheus, punished by Zeus Prometheus, punished by Zeus. Prometheus is a ‘cousin’ of Zeus. He is the son of the...

Comments

Leave feedback

Your email address will not be published. Required fields are marked *