By using LASSO to select among the 53 determinants of idiosyncratic volatility documented in the literature, we identify a component that is positively linked to future stock returns, in addition to the negative component that obscures the positive component. This positive component explains the...

This paper investigates the causal impact of short-sale constraints on the idiosyncratic volatility (IVOL) puzzle. Our identification strategies rely on two opposing exogenous shocks to short-sale constraints: (1) Regulation SHO which relaxes constraints for pilot stocks; (2) the Job and Growth...