Idiosyncratic risk and the cross-section of stock returns: Merton (1987) meets Miller (1977)

Journal of Financial Markets

Volumn 12, Issue 3, 2009, Pages 438-468

  Boehme, Rodney D ^a   Danielsen, Bartley R ^b   Kumar, Praveen ^c   Sorescu, Sorin M ^d  

^a WICHITA STATE UNIVERSITY   (United States)

^b NORTH CAROLINA STATE UNIVERSITY   (United States)

^c UNIVERSITY OF HOUSTON   (United States)

^d TEXAS A AND M UNIVERSITY   (United States)

Author keywords

Idiosyncratic risk; Market efficiency; Short sales

Indexed keywords

EID: 67649342944     PISSN: 13864181     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.finmar.2009.01.004     Document Type: Article

References (36)

1. Aggarwal R., Klapper L., and Wysocki P. Portfolio preferences of foreign institutional investors. Journal of Banking and Finance 29 (2005) 2919-2946
2. Amihud Y. Illiquidity and stock returns: cross-section and time-series effects. Journal of Financial Markets 5 (2002) 31-56
3. Ang A., Hodrick R., Xing Y., and Zhang X. The cross-section of volatility and expected returns. Journal of Finance 61 (2006) 259-299
4. Asquith P., and Meulbroek L. An empirical investigation of short interest (1995), Unpublished Working Paper, Harvard Business School
5. Asquith P., Pathak P., and Ritter J. Short interest, institutional ownership, and stock returns. Journal of Financial Economics 78 (2005) 243-276
6. Baker H., Powell G., and Weaver D. Does NYSE listing affect firm visibility?. Financial Management 28 (1999) 46-54
7. Barberis N., and Huang M. Mental accounting, loss aversion, and individual stock returns. Journal of Finance 56 (2001) 1247-1292
8. Boehme R., and Sorescu S. The long-run stock performance following dividend initiations and resumptions: underreaction or product of chance?. Journal of Finance 57 (2002) 871-900
9. Boehme R., Danielsen B., and Sorescu S. Short-sale constraints, dispersion of opinion and overvaluation. Journal of Financial and Quantitative Analysis 41 (2006) 455-487
10. Carhart M. On persistence in mutual fund performance. Journal of Finance 52 (1997) 57-82
11. Chen J., Hong H., and Stein J. Breadth of ownership and stock returns. Journal of Financial Economics 66 (2002) 171-205
12. Danielsen B., and Sorescu S. Why do option introductions depress stock prices? A study of diminishing short-sale constraints. Journal of Financial and Quantitative Analysis 36 (2001) 451-484
13. Desai H., Ramesh K., Thiagarajan S., and Balachandran B. An investigation of the informational role of short interest in the Nasdaq market. Journal of Finance 57 (2002) 2263-2287
14. Diamond D., and Verrecchia R. Constraints on short-selling and asset price adjustment to private information. Journal of Financial Economics 18 (1987) 277-312
15. Diether K., Malloy C., and Scherbina A. Differences of opinion and the cross-section of stock returns. Journal of Finance 57 (2002) 2113-2141
16. Duffie D., Garleanu N., and Pedersen L. Securities lending shorting and pricing. Journal of Financial Economics 66 (2002) 307-339
17. Eckbo B., and Norli Ø. Liquidity risk, leverage and long-run IPO returns. Journal of Corporate Finance 11 (2005) 1-35
18. Falkenstein E. Preferences for stock characteristics as revealed by mutual fund portfolio holdings. Journal of Finance 51 (1996) 111-135
19. Fama E., and French K. Common risk factors in returns on stocks and bonds. Journal of Financial Economics 33 (1993) 3-56
20. Fama E., and Macbeth J. Risk, return, and equilibrium: empirical tests. Journal of Political Economy 81 (1973) 607-636
21. Figlewski S. The informational effects of restrictions on short sales: some empirical evidence. Journal of Financial and Quantitative Analysis 16 (1981) 463-476
22. Gebhardt W., Lee C., and Swaminathan B. Toward an implied cost of capital. Journal of Accounting Research 39 (2001) 135-142
23. Ikenberry D., and Ramnath S. Underreaction to self-selected news events: the case of stock splits. Review of Financial Studies 15 (2002) 489-526
24. Jarrow R. Heterogeneous expectations, restrictions on short sales, and equilibrium asset prices. Journal of Finance 35 (1980) 1105-1113
25. Levy H. Equilibrium in an imperfect market: a constraint on the number of securities in the portfolio. American Economic Review 68 (1978) 643-659
26. Loughran T., and Ritter J. Uniformly least powerful tests of market efficiency. Journal of Financial Economics 55 (2000) 361-389
27. Mayers D. Nonmarketable assets, market segmentation, and the level of asset prices. Journal of Financial and Quantitative Analysis 11 (1976) 1-12
28. Merton R. A simple model of capital market equilibrium with incomplete information. Journal of Finance 42 (1987) 483-510
29. Miller E. Risk, uncertainty, and divergence of opinion. Journal of Finance 32 (1977) 1151-1168
30. Mitchell M., and Stafford E. Managerial decisions and long-term stock price performance. Journal of Business 73 (2000) 287-329
31. Morris S. Speculative investor behavior and learning. The Quarterly Journal of Economics 111 (1996) 1111-1133
32. Newey W., and West K. A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix. Econometrica 55 (1987) 703-709
33. Peterson P., and Peterson D. Divergence of opinion and return. Journal of Financial Research 5 (1982) 125-134
34. Shapiro A. The investor recognition hypothesis in a dynamic general equilibrium: theory and evidence. Review of Financial Studies 15 (2002) 97-141
35. Spiegel, M., Wang, X., 2005. Cross-sectional variation in stock returns: liquidity and idiosyncratic risk. Unpublished Working Paper, Yale University.
36. Viswanathan, S., 2002. Strategic trading, heterogeneous beliefs/information, and short constraints. Unpublished Working Paper, Duke University.