Idiosyncratic Risk and Capital Outlays
Date Issued
2012
Date
2012
Author(s)
Liu, Hsiao-Wei
Abstract
This paper uses stock return and two-factor market model to get the estimates of idiosycratic risk. Our sample includes publicly traded firms listed on NYSE、NASDAQ、AMEX. We use the Least Squares Dummy Variable Model(LSDV) to examines the relation between idiosyncratic risk and investment during 1980-2010. Furthermore,we investigate whether there are significant changes in coefficient of idiosyncratic risk due to financial shock in 1987 and 2000.
The results are as follows：(1) There is a significantly negative relation between idiosyncratic risk and investment. (2) The sensitivity of invesment to idiosyncratic risk increases after the stock bubble burst.
Subjects
idiosyncratic risk
capital outlays
stock market bubble
Type
thesis
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