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Dispersion and Volatility in Stock Returns: An Empirical Investigation

John Campbell () and Martin Lettau ()

No 7144, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies three different measures of monthly stock market volatility: the time-series volatility of daily market returns within the month; the cross-sectional volatility or 'dispersion' of daily returns on industry portfolios, relative to the market, within the month; and the dispersion of daily returns on individual firms, relative to their industries, within the month. Over the period 1962-97 there has been a noticeable increase in firm-level volatility relative to market volatility. All the volatility measures move together in a countercyclical fashion. While market volatility tends to lead the other volatility series, industry-level volatility is a particularly important leading indicator for the business cycle.

New Economics Papers: this item is included in nep-ets and nep-fin
Date: 1999-05
Note: AP
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Working Paper: Dispersion and Volatility in Stock Returns: An Empirical Investigation (1998) Downloads
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