Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk

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Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk

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Title: Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk
Author: Malkiel, Burton; Campbell, John; Lettau, Martin; Xu, Yexiao

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Citation: Campbell, John Y., Martin Lettau, Burton G. Malkiel, and Yexiao Xu. 2001. Have individual stocks become more volatile? An empirical exploration of idiosyncratic risk. Journal of Finance 56(1): 1-43.
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Abstract: This paper uses a disaggregated approach to study the volatility of common stocks at the market, industry, and firm levels. Over the period from 1962 to 1997 there has been a noticeable increase in firm-level volatility relative to market volatility. Accordingly, correlations among individual stocks and the explanatory power of the market model for a typical stock have declined, whereas the number of stocks needed to achieve a given level of diversification has increased. All the volatility measures move together countercyclically and help to predict GDP growth. Market volatility tends to lead the other volatility series. Factors that may be responsible for these findings are suggested. The definitive version is available at www.blackwell-synergy.com.
Published Version: http://dx.doi.org/10.1111/0022-1082.00318
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:3128707

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  • FAS Scholarly Articles [6902]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University
 
 

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