A1639
Title: Idiosyncratic quantile risk and asset prices
Authors: Matej Nevrla - UTIA AV CR vvi (Czech Republic) [presenting]
Jozef Barunik - UTIA AV CR vvi (Czech Republic)
Abstract: The aim is to investigate common movements of idiosyncratic components of asset returns in their quantiles. Using a large panel of stock returns, we estimate latent idiosyncratic quantile factors, define and estimate corresponding betas, and analyze their significance for both time-series and cross-sectional implications. We specifically focus on the fluctuations in the left tail of the return distributions. To estimate the quantile factors, we employ state-of-the-art methods and select the appropriate number of factors sufficient to describe the distributions' common movement. The added value is assessed with respect to the idiosyncratic volatility risk and other tail risk measures widely used in the literature. The results are of importance for both theoretical asset pricing models and empirical efforts in the literature.
