Discussion paper

DP18230 The International Commonality of Idiosyncratic Variances

We document strong global commonality in country idiosyncratic return variances across 23 developed markets, which is stronger than international return commonality. The global common factor of idiosyncratic return variances is highly correlated with that of idiosyncratic cash flow variances, and is also significantly related to variables capturing aggregate discount rate variation and the conditional market variance. Furthermore, aggregate idiosyncratic return and cash flow variances are predominantly but not always countercyclical.


Bekaert, G, X Wang and X Zhang (2023), ‘DP18230 The International Commonality of Idiosyncratic Variances‘, CEPR Discussion Paper No. 18230. CEPR Press, Paris & London. https://cepr.org/publications/dp18230