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Asian Review of Financial Research Vol.35 No.4 pp.55-88
The Relationship between the Idiosyncratic Volatility Puzzle and Trading Volume by Trader Types
Seungho Cho 중앙대학교 박사(Ph.D., Chung-Ang University)
Shiyong Yoo* 중앙대학교 경영학부 교수(Professor, Chung-Ang University)
Key Words : Volatility,Idiosyncratic volatility(IV),Idiosynractic volatility puzzle,Individual investor,Trading weight


The relationship between idiosyncratic volatility and investors' trading weight is studied from February 2000 to June 2022, targeting stocks listed in the KOSPI and the KOSDAQ. The idiosyncratic volatility puzzle is examined according to the individual investors' total trading weight(TW), net buying TW, intra-individual TW, and buying (selling) TW. The individual total TW has a positive (+) effect on total volatility(TV), systematic volatility, idiosyncratic volatility(IV), and especially IV²/TV². The IV puzzles appear differently in the KOSPI and the KOSDAQ. In the KOSPI, we find that statistically significant high risk-high return results, which coincide with conventional financial theory rather than the IV puzzle, in some portfolios with a low individual investors' total TW and some portfolios with a low intra-individual TW, respectively. We newly find that the intra-individual TW can cause the IV puzzle through these results.
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