Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk
John Campbell (),
Martin Lettau and
Scholarly Articles from Harvard University Department of Economics
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.
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Published in Journal of Finance
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Working Paper: Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:3128707
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