The Volatility of Stock Investor Returns

44 Pages Posted: 3 Sep 2020 Last revised: 15 May 2021

See all articles by Ilia D. Dichev

Ilia D. Dichev

Emory University - Department of Accounting

Xin Zheng

University of British Columbia

Multiple version iconThere are 2 versions of this paper

Date Written: May 11, 2021


The volatility of investor returns depends not only on the volatility of the stocks investors hold but also on their time-varying capital exposure to these holdings. We provide comprehensive evidence on the volatility of investor returns using individual stocks, portfolios of stocks, and market indexes from the U.S. and major international stock markets. Our main finding is that the volatility of investor returns is higher than the corresponding volatility of stock returns in nearly all specifications. The relative magnitude of the volatility differential varies from as little as 10% and up to 75%, where this differential tends to increase with investment horizon. Probing into the drivers of this volatility differential reveals that firms issue more equity after low past volatility but before high future volatility, implying that managers cater to investor propensity to "chase stability." Overall, taken together with existing evidence that investor returns tend to be lower than corresponding stock returns, this study suggests that the risk-return trade-off for stock investors is worse than previously thought.

Keywords: Investor Returns, Dollar-weighted Returns, Return Volatility, Stock Returns

JEL Classification: G10, G11, G15

Suggested Citation

Dichev, Ilia D. and Zheng, Xin, The Volatility of Stock Investor Returns (May 11, 2021). Available at SSRN: or

Ilia D. Dichev

Emory University - Department of Accounting ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

Xin Zheng (Contact Author)

University of British Columbia ( email )

2053 Main Mall
Vancouver, B.C. V6T 1Z2

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