50 Pages Posted: 2 May 2013
Date Written: July 5, 2011
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.
Keywords: Firm risk, volatility, idiosyncratic risk, R-squared
JEL Classification: G12, G15
Suggested Citation: Suggested Citation
Bartram, Söhnke M. and Brown, Gregory W. and Stulz, René M., Why are U.S. Stocks More Volatile? (July 5, 2011). Journal of Finance, Vol. 67, No. 4, 2012, pp. 1329-1370. Available at SSRN: https://ssrn.com/abstract=2257549
By Vikrant Vig