Does idiosyncratic volatility matter? New Zealand evidence

Michael E. Drew, Alastair Marsden, Madhu Veeraraghavan

Research output: Contribution to journalArticlepeer-review

12 Citations (Scopus)


Standard asset pricing models ignore idiosyncratic risk. In this study, we examine if idiosyncratic or unique risk affects returns for New Zealand stocks using the factor portfolio mimicking approach of Fama and French (1993, 1996). We find evidence of a negative relationship between firm size and a stock's idiosyncratic volatility. We also find that high idiosyncratic volatility firms have high betas and generate low earnings on book equity.

Original languageEnglish
Pages (from-to)289-308
Number of pages20
JournalReview of Pacific Basin Financial Markets and Policies
Issue number3
Publication statusPublished - 09-2007

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


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