I develop a multi-sector model to study the network implications for idiosyncratic volatility spillover, conceptualizing firms as nodes and idiosyncratic risk spillover as linkages. I introduce two factors to characterize the spillover network: Risk-Dominance, measuring the dominance in risk propagation, and Risk-Intensity, assessing the average spillover intensity. In equilibrium, higher Risk-Intensity and lower Risk-Dominance impede idiosyncratic risk diversification and increase aggregate volatility. Empirically, I construct the network factors from stock data and validate the mechanism. Consistent with the model, I find an annual return spread of +5% and -4% on Risk-Dominance and Risk-Intensity beta-sorted portfolios, respectively.
