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Isolating the systematic and unsystematic components of a single stock's (or portfolio's) standard deviation: a comment*

* This paper is a replication of an original study

Author

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  • Fabio Pizzutilo

Abstract

In an article that recently appeared in this journal, Marshall (2015) argued that the systematic component of the SD of a stock or of a portfolio of stocks is its beta scaled by the SD of the market returns. She also contended that the beta mispredicts the actual systematic risk of a stock or of a portfolio of stocks. In this article, I dispute this conclusion, showing that it has been induced by an imperfection in the construction of the empirical application and by some misinterpretations of the results. A corrected replication of the empirical study of Marshall (2015) is provided, along with some comments. I conclude that both the beta and the systematic component in Marshall (2015) are effective measures of systematic risk.

Suggested Citation

  • Fabio Pizzutilo, 2015. "Isolating the systematic and unsystematic components of a single stock's (or portfolio's) standard deviation: a comment," Applied Economics, Taylor & Francis Journals, vol. 47(58), pages 6277-6283, December.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:58:p:6277-6283
    DOI: 10.1080/00036846.2015.1068925
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    Citations

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    Cited by:

    1. Vafai, Nima & Rakowski, David, 2024. "The sources of portfolio volatility and mutual fund performance," International Review of Financial Analysis, Elsevier, vol. 91(C).
    2. Fabio Pizzutilo, 2017. "Measuring the under-diversification of socially responsible investments," Applied Economics Letters, Taylor & Francis Journals, vol. 24(14), pages 1005-1018, August.

    Replication

    This item is a replication of:
  • Cara M. Marshall, 2015. "Isolating the systematic and unsystematic components of a single stock's (or portfolio's) standard deviation," Applied Economics, Taylor & Francis Journals, vol. 47(1), pages 1-11, January.

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