cam a22 2 4500 357889568 CHVBK 20200107115712.0 cr ||||||||||| 160307s2016 xxu||||||---- 00 |eng-d (OCoLC)944080715 (IDSSG)000855771 SzZuIDS HSG ger rda Mehra Rajnish Verfasser aut The Demand for Diversification in Incomplete Markets Rajnish Mehra, Sunil Wahal, Daruo Xie Cambridge, MA National Bureau of Economic Research 2016 1 Online-Ressource Text txt rdacontent/ger Computermedien c rdamedia/ger Online-Ressource cr rdacarrier/ger NBER working paper series 22016 22016 (IDSSG)000043070 523018967 Endogenous diversification in a market with incomplete information generates a state-dependent premium for bearing idiosyncratic risk because time series variation in average idiosyncratic risk affects the disutility of under-diversification. This idea delivers a metric that maps the marginal disutility of under-diversification to the covariance of idiosyncratic risk with average idiosyncratic risk. The metric helps explain the cross-section of returns in the US between 1973 and 2014, especially in periods of low average idiosyncratic risk. In such periods, portfolios tests generate intercepts from factor models that are economically large, and present in both small and large capitalization stocks. We observe similarly large intercepts in markets outside the US, particularly in large stocks. Wahal Sunil Verfasser aut Xie Daruo Verfasser aut http://www.nber.org/papers/w22016 Full text for the University of St. Gallen Metadata Rights Reserved ids I noalma ids I IDSSG 100 1- Mehra Rajnish Verfasser aut IDSSG 490 0- NBER working paper series 22016 22016 (IDSSG)000043070 523018967 IDSSG 700 1- Wahal Sunil Verfasser aut IDSSG 700 1- Xie Daruo Verfasser aut IDSSG 856 -- http://www.nber.org/papers/w22016 Full text for the University of St. Gallen Metadata rights reserved idssg BK020053 XK020053 XK020000 IDSSG HSG HSG ONL HONL000855771