This paper tests the behavioral explanation for idiosyncratic puzzle brought by Stambaugh, Yu, and Yuan (2013). Idiosyncratic volatility represents arbitrage risk and show an asymmetric effect in overpriced and underpriced stocks. I apply fire sale (purchase) by open-ended mutual fund to proxy stock mispricing. Grouping by this exogenous mispricing, idiosyncratic volatility shows positive effect in underpriced stocks and negative effect in overpriced stocks. I also look into the interaction between stock idiosyncratic volatility and mutual funds trading behavior.
| Date of Award | 2014 |
|---|
| Original language | English |
|---|
| Awarding Institution | - The Hong Kong University of Science and Technology
|
|---|
Mutual fund fire sales/purchases and idiosyncratic volatility
Wang, B. (Author). 2014
Student thesis: Master's thesis