Bali and Cakici (2006) find no relation between equally-weighted portfolio returns and idiosyncratic risk, whereas Ang et al. (2006a) report a negative relation between value-weighted portfolio returns and idiosyncratic risk. Our analyses demonstrate that both findings can be explained by short-term monthly return reversals. The abnormal positive returns from taking a long (short) position in the low (high) idiosyncratic risk portfolio are fully explained by an additional control variable, the “winners minus losers” portfolio returns,introduced to the conventional three- or four- factor time-series regression model. The cross-sectional regressions also confirm that no robust and significant relation exists between idiosyncratic risk and expected returns once we control for return reversals.
Whether idiosyncratic risk is priced in asset returns has been the subject of considerable attention in recent years due to its critical importance in asset pricing and portfolio allocation. This issue has gained further importancegiven the recent evidence that both firm-level volatility and the number of stocks needed to achieve a specific level of diversification have increased in the United States over time [Campbell et al. (2001)]. The empirical results reported so far are mixed. Consistent with earlier research such as Lehmann (1990a), Lintner (1965), Tinic and West (1986), and Merton (1987), a number of recent studies report a significant positive relation between idiosyncratic risk and expected stock returns, either at the aggregate level [Goyal and Santa-Clara (2003), Jiang and Lee (2005)], or at the firm or portfolio level [Malkiel and Xu (2002), Fu (2005), Spiegel and Wang (2005), Chua et el. (2006)]. Other studies, however, do not support this positive relation. For example, in their classic empirical asset pricing study, Fama and MacBeth (1973) document that the statistical significance of idiosyncratic risk is negligible. Bali et al. (2005) find that the positive relation documented by Goyal and Santa-Clara (2003) at the aggregate level is not robust. Guo and Savickas (2006) report a negative relation between aggregate stock market idiosyncratic volatility and the future quarterly stock market return.
The overlapping communication of color according to ICC-Standard is todays foundation for color management in a media production environment. Applied color management will bring predictability and consequently security along into the color workflow, from data input to conversion and output processing.
What is the fundamental challenge of color management within the boundaries of physics:
- make the scan look like the original on the monitor.
- make the print look like the original on the monitor.
- make the print of a scan, without much examination on the monitor, look very similar to the original.
- generate verification for images to look similar on different machines and monitors.
In recent decades the structure of financial markets has change from a bank-based to a market-based financial system - an Originate, Rate and Relocate model. Financial regulation and crisis management have not kept pace with these changes. A lack of focus on the changing systemic characteristics of the financial system is a significant characteristic of Basel 2 and of the Capital Requirements Directive.
The threat to liquidity: homogeneous behaviour of market participants
If markets are to be liquid and reasonably stable they should have a wide range of participants with heterogeneous objectives and methods. Markets become illiquid when actions become homogeneous especially in the face of extreme events when everyone wants to sell. The liberalisation of financial markets has reduced heterogeneity in financial markets. Financial sector regulators are reinforcing the homogenising process by encouraging firms to use the same risk management techniques.
