Thursday 16 November – from 1:15pm to 2:15pm
“Hedge Funds and the Positive Idiosyncratic Volatility Effect” (with Turan G. Bali)
Florian Weigert, Full Professor of Financial Risk Management at the University of Neuchâtel (Switzerland)
While it is established that idiosyncratic volatility has a negative impact on the cross-section of stock returns, this relation is largely unexplored for hedge funds. We document that hedge funds with high idiosyncratic volatility earn higher future risk-adjusted returns of 6% p.a. than hedge funds with low idiosyncratic volatility. The outperformance arises because hedge funds trade high idiosyncratic volatilitry stocks wisely. They pick high volatility stocks when they are underpriced and short-sell high volatility stocks when they are overpriced. Our results support the notion that hedge funds’ idiosyncratic volatility is a measure of managerial skill.
Registration, please contact firstname.lastname@example.org
Amphi 1075 Ecully campus