Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212840 
Year of Publication: 
2015
Series/Report no.: 
BOFIT Discussion Papers No. 30/2015
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
Abstract: 
​In this paper, we explore a relation between expected returns and idiosyncratic risk. As in many emerging markets, investors in the Russian stock market cannot fully diversify their portfolios due to transaction costs, information gathering and processing costs, and short-comings in investor protection. This implies that investors demand a premium for idiosyncratic risk – unique asset-specific risk plays a role in investment decisions. We estimate the price of idiosyncratic risk using MIDAS regressions and a cross-section of Russian industry portfolios. We find that idiosyncratic risk commands an economically and statistically significant risk premium. The results remain unaffected after controlling for global pricing factors and short-term return reversal.
JEL: 
G12
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-070-5
Document Type: 
Working Paper

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