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Why are U.S. Stocks More Volatile?Söhnke M. BartramWarwick Business School - Department of Finance Gregory W. BrownUniversity of North Carolina (UNC) at Chapel Hill - Finance Area Rene M. StulzOhio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI) March 1, 2008 Abstract: U.S. stocks are more volatile than stocks of similar foreign firms. A firm’s stock return volatility can be higher for reasons that contribute positively (good volatility) or negatively (bad volatility) to shareholder wealth and economic growth. We find that the volatility of U.S. firms is higher mostly because of good volatility. Specifically, firm stock volatility is higher in the U.S. because it increases with investor protection, stock market development, new patents, and firm-level investment in R&D. These are all factors that are related to better growth opportunities for firms and better ability to take advantage of these opportunities.
Number of Pages in PDF File: 49 Keywords: Volatility, Idiosyncratic Risk, Financial Market Development JEL Classification: G15 working papers seriesDate posted: March 27, 2008 ; Last revised: September 2, 2012Suggested CitationContact Information
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