The Information Content of Idiosyncratic Volatility of Stock Return

The relationship between risk and return and also identification of factors explaining return, have attracted the attention of scholars in finance.In recent years, the weaknesses of Capital Asset Pricing Model (CAPM), have led finance researchers to look for other effective and efficient factors. The Fama–French three-factor model shows the stocks monthly return depend on market, size, and book value to market value. However, the relation between return and these three factors- size, market, and value premium - has not been enlightened clearly.In this research, it has been attempted to focus on the unexplained section of this relation and also the connection between Idiosyncratic Volatilities (IVOL) and "book value to market value" has been examined.Finally based on panel data analysis on 40 listed companies in Tehran Stock Exchange (TSE), it has been identified IVOL has direct relation with the size of the companies and adverse relation to "book value to market value".