Dynamics of Idiosyncratic Volatility and Market Volatility: An Emerging Market Perspective

摘要

Estimating idiosyncratic volatility (IVOL) using various model-dependent and model-independent measures, we investigate the characteristics of aggregate IVOL in Malaysia over the period 1990-2008. The IVOL estimated in all models have similar patterns and has no trend over the sample period. There is evidence of episodic phenomenon. During financial crisis periods, market volatility is relatively higher than IVOL - a plausible reason is high correlation between firms' returns. Small firms and low-priced stocks appear to influence IVOL more than large firms and high-priced stocks. In Malaysia, market volatility and IVOL may predict GDP growth.