Idiosyncratic Risk On The Rise, Morgan Stanley Quants Warn

Idiosyncratic risk, volatility not explained by the larger beta market environment, is on the rise. Median 63-day rolling risk has not just hit new highs since the financial crisis, the Morgan Stanleyreport dated December 12 noted. But the idiosyncratic risk has risen to highs not seen since October 2000.

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Idiosyncratic risk up significantly as overall market volatility hits all-time lows, Morgan Stanley Report observes

Stock specific risk is “up sharply” on a 63-day as well as 252-day basis, Brian Hayes and his quantitative equity research team at Morgan Stanley observed, noting that such risk is “positive for subsequent alpha generation.”

The rise in individual stock risk comes as...