The relation between market risk and asset returns can be modelled with the Security Market Line (SML), a positive linear relation between expected excess asset returns and the asset's β. Pettengill et al. (1995) make the case that tests of β must be conditioned upon excess market returns to...

This article examines whether idiosyncratic risk is priced for equities listed in the Australian Stock Exchange (ASX). Specifically, this article follows the methodology of Bali et al. (2005) and investigates whether idiosyncratic volatility is able to predict 1-month ahead excess returns on the...