We analyze whether the idiosyncratic risk puzzle noted by Ang et al. (2006, 2009) can be explained by the existence of market participants with different investment horizons. We adopt a wavelet multiresolution analysis to decompose returns distribution for different time scales. Our approach...

There is strong evidence showing that stocks with higher levels of idiosyncratic risk provide relatively lower returns than stocks with lower levels of it. This paper points out that this negative idiosyncratic risk - expected returns relation is not pervasive over time, and provides a plausible...