High Idiosyncratic Volatility and Low Returns: A Prospect Theory Explanation
研究发现，在损失区域投资者风险寻求的行为导致高特质波动率股票回报更低，且这种负相关仅存在于有未实现资本损失的股票中。
The well‐documented negative relationship between idiosyncratic volatility and stock returns is puzzling if investors are risk‐averse. However, under prospect theory, while investors are risk‐averse in the domain of gains, they exhibit risk‐seeking behavior in the domain of losses. Consistent with risk‐seeking investors’ preference for high‐volatility stocks in the loss domain, we find that the negative relationship between idiosyncratic volatility and stock returns is concentrated in stocks with unrealized capital losses, but is nonexistent in stocks with unrealized capital gains. This finding is robust to control for short‐term return reversals and maximum daily return, among other variables.