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Investigating the Behavior of Idiosyncratic Volatility

Yexiao Xu and Burton G. Malkiel
The Journal of Business
Vol. 76, No. 4 (October 2003), pp. 613-645
DOI: 10.1086/377033
Stable URL: http://www.jstor.org/stable/10.1086/377033
Page Count: 32
Subjects: Business Finance
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Investigating the Behavior of Idiosyncratic Volatility
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Abstract

This article studies the behavior of idiosyncratic volatility for the post–World War II period. Using aggregate idiosyncratic volatility statistics constructed from the Fama and French (1993) three‐factor model, we find that the volatility of individual stocks appears to have increased over time. This trend is not solely attributed to the increasing prominence of the NASDAQ market. We go on to suggest that the idiosyncratic volatility of individual stocks is associated with the degree to which their shares are owned by financial institutions. Finally, we show that idiosyncratic volatility is also positively related to expected earnings growth.

Notes and References

This item contains 28 references.

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