Idiosyncratic volatility as a new factor

Under the research hypothesis of testing whether there is a significant relation between expected stock return and idiosyncratic volatility in emerging markets, we gathered 5-year daily return data on MSCI Emerging Markets Index constituents and investigated the prediction power of four type of asset pricing models (e.g. CAPM, 3-factor Fama-French, 4-factor Carhart and modified 5-factor Carhart model with idiosyncratic volatility (IVHML).
We discovered, that the IVHML coefficient is significant in all testing periods, and the overall model better describes expected returns (Adj. R^2 is higher among all others).

本研究以检验新兴市场环境下预期股票收益与特质波动率间是否存在显著关联为核心研究假设，采集了摩根士丹利资本国际新兴市场指数（MSCI Emerging Markets Index）成分股的5年期日度收益数据，并考察了四类资产定价模型的预测效能，具体包括资本资产定价模型（CAPM）、法玛-弗伦奇三因子模型、卡哈特四因子模型，以及引入特质波动率（idiosyncratic volatility）因子（IVHML）的改进型卡哈特五因子模型。
研究结果表明，IVHML的回归系数在所有测试周期中均显著，且该整体模型对预期收益的拟合效果更优，其调整后判定系数Adj. R²高于其余所有模型。