We investigate the relationship between changing correlation structure of returns, security risk, and mean return. According to our results, securities that were highly correlated with the market-wide risk factors in the past are likely to have high systematic and idiosyncratic risk at present....

We investigate the effects of several firm characteristics utilized in the recent literature to account for puzzling dynamics of idiosyncratic risk. Our results suggest that these characteristics (book-to-market, leverage, size, institutional ownership, earnings-per-share, and turnover) are able...