BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 30/2015:
Expected returns and idiosyncratic risk: Industry-level evidence from Russia
Jyri Kinnunen ()
and Minna Martikainen
Abstract: In this paper, we explore a relation between expected
returns and idiosyncratic risk. As in many emerging markets, investors in
the Russian stock market cannot fully diversify their portfolios due to
transaction costs, information gathering and processing costs, and
short-comings in investor protection. This implies that investors demand a
premium for idiosyncratic risk – unique asset-specific risk plays a role in
investment decisions. We estimate the price of idiosyncratic risk using
MIDAS regressions and a cross-section of Russian industry portfolios. We
find that idiosyncratic risk commands an economically and statistically
significant risk premium. The results remain unaffected after controlling
for global pricing factors and short-term return reversal.
Keywords: idiosyncratic risk; industry risk; cross-sectional returns; MIDAS; Russia; (follow links to similar papers)
JEL-Codes: G12; (follow links to similar papers)
32 pages, October 30, 2015
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
dp3015%5b1%5d.pdf?sequence=1 
Download Statistics
Questions (including download problems) about the papers in this series should be directed to Päivi Määttä ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Programing by
Design by Joachim Ekebom
