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
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.
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Working Paper: Dispersion and Volatility in Stock Returns: An Empirical Investigation (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:7144
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