Larger Stocks Earn Higher Returns!

• Main Authors: FU, Fangjian, YANG, Wei
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2010
• Subjects: Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/3043
• Institution: Singapore Management University

Controlling for idiosyncratic volatility, large stocks earn higher returns than small stocks. Idiosyncratic volatility is positively related to return, but negatively related to size. Failure to control for idiosyncratic volatility generates a downward omitted variable bias, leading to the widely do...