Investor Diversification and the Pricing of Idiosyncratic Risk

• Main Author: FU, Fangjian
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2010
• Subjects: Idiosyncratic risk; Stock returns; Diversification; Institutional investors; Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/3042; https://ink.library.smu.edu.sg/context/lkcsb_research/article/4041/viewcontent/FuFJ2010InvestorDiversificationAndThePricingOfIdiosyncraticRisk.pdf
• Institution: Singapore Management University

Theories predict that, due to investor under-diversification, idiosyncratic risk is positively priced in expected stock returns. Empirical studies based on various methodologies yield mixed evidence. This study circumvents the debate on methodological issues and traces the pricing of idiosyncratic r...