Prof.  Rajeev  Singhal
School of Business Administration, Oakland University,  USA

Title: Idiosyncratic Risk and Return

Abstract:

Several papers have examined whether idiosyncratic risk affects returns. Goyal and Santa Clara (2003) and Fu (2009) show that idiosyncratic risk matters for expected returns. Guo, Kassa, and Fergusson (2012) argue that Fu (2009) suffers from look-ahead bias and after correcting for such bias, idiosyncratic risk does not matter. We take a fresh look at the debate by pointing out data problems introduced in the analysis of the relationship between idiosyncratic risk and expected returns. Specifically, we examine the firm returns used to estimate conditional idiosyncratic volatility. We also show that the Fama-Macbeth (1973) procedure while correcting for the cross-sectional correlations does not account for time series autocorrelations and correct for the autocorrelations. Further, we also account for clustering of standard errors in the cross-section and across time for robust results. 

Biography:

Dr. Singhal is the professor of finance and the chair of department of accounting and finance at the Oakland University in Michigan, USA which he joined in 2003 after completing his PhD from the University of Utah.. Dr. Singhal’s research interests lie at the intersection of accounting & finance and he has published in top journals in both the areas. He has also spent time in corporate America when he took leave for a year and worked with Moody’s Analytics, then a subsidiary of Moody’s Investors Services, a global rating agency. Before deciding to pursue a PhD, Dr. Singhal completed his MBA from the Indian Institute of Management and engineering degree from Birla Institute of Technology and Science.