Ang, Hodrick, Xing, and Zhang (2006) Paper

Question 1

In the paper The Cross-Section of Volatility and Expected Returns, by Ang, Hodrick, Xing, and Zhang (2006) the authors document several empirical findings. Which of the following statements is made by the authors with regards to this specific article. Choose the right answer from the list below:

(a) Stocks with high sensitivities to innovations in aggregate volatility have low average returns. (b) Stocks with high idiosyncratic volatility relative to the Fama and French model have large and significant average returns. (c) Size and book-to-market, cannot account for either the low average returns earned by stocks with high exposure to systematic volatility risk or for the low average returns of stocks with high idiosyncratic volatility. However, momentum and liquidity e§ects can account for them. (d) Momentum stocks have larger average returns in states of higher systematic volatility risk. (e) None of the above

Answer 1

A