An Investigation on the nature of the idiosyncratic risk of stock portfolios

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2018

Author

Kocaarslan, Barış

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In this study, based on sound economic theories, two economic transmission channels are identified to investigate the impacts of changes in funding liquidity conditions in interbank loan markets and the reserve currency (US dollar) value on the idiosyncratic portfolio-level risks. Controlling for business cycles, we find that a deterioration in funding liquidity conditions increases the idiosyncratic risk of high-risk portfolios more than that of less risky portfolios. This increase is stronger when the idiosyncratic risks contain uncertainty information about major financial and commodity markets. Furthermore, similar to this finding, the idiosyncratic risk of portfolios (especially the high-risk ones) is considerably enhanced by the increases in US dollar value against major foreign currencies when uncertainty about the major markets is taken into consideration.

Subject Keywords

Portfolio management., Liquidity (Economics)., Stock exchanges., Capital market., Money market.

URI

http://etd.lib.metu.edu.tr/upload/12622574/index.pdf
https://hdl.handle.net/11511/27763

Collections

Graduate School of Social Sciences, Thesis

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Citation Formats

B. Kocaarslan, “An Investigation on the nature of the idiosyncratic risk of stock portfolios,” Ph.D. - Doctoral Program, Middle East Technical University, 2018.