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A Note on a New Weighted Idiosyncratic Risk Measure

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  • Yin-Ching Jan

Abstract

This note remedies a risk measure, which was proposed by the work of Jan and Wang (2012). They used property of martingale to measure idiosyncratic risk, and illustrated that it is better than the measurements of variance and semivariance. However, their risk measure can¡¯t distinguish between the assets whose return rising firstly and then declining, and the assets whose return declining firstly and then rising. In this note, I propose a remedied method, which puts more weight to the recent return¡¯s variation, and demonstrate that the new weighting risk measure is more close to the investor risk conception.

Suggested Citation

  • Yin-Ching Jan, 2014. "A Note on a New Weighted Idiosyncratic Risk Measure," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 5(3), pages 194-198, July.
    • Handle: RePEc:jfr:ijfr11:v:5:y:2014:i:3:p:194-198
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    References listed on IDEAS

    as
    1. Yin-Ching Jan & Su-Ling Chiu & Jerry M. C. Wang, 2013. "New Risk Measure and Idiosyncratic Risk in Taiwan Stock Market," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 4(2), pages 77-82, April.
    2. Esther Eiling, 2013. "Industry-Specific Human Capital, Idiosyncratic Risk, and the Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 68(1), pages 43-84, February.
    3. Andrew Ang & Robert J. Hodrick & Yuhang Xing & Xiaoyan Zhang, 2006. "The Cross‐Section of Volatility and Expected Returns," Journal of Finance, American Finance Association, vol. 61(1), pages 259-299, February.
    4. Fu, Fangjian, 2009. "Idiosyncratic risk and the cross-section of expected stock returns," Journal of Financial Economics, Elsevier, vol. 91(1), pages 24-37, January.
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