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Why Are U.S. Stocks More Volatile?
Author(s) -
BARTRAM SÖHNKE M.,
BROWN GREGORY,
STULZ RENÉ M.
Publication year - 2012
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2012.01749.x
Subject(s) - volatility (finance) , stock (firearms) , monetary economics , volatility risk premium , volatility swap , shareholder , economics , financial economics , growth stock , stock market , business , volatility smile , implied volatility , stock market bubble , finance , corporate governance , mechanical engineering , paleontology , horse , engineering , biology
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, stock volatility is higher in the United States because it increases with investor protection, stock market development, new patents, and firm‐level investment in R&D. Each of these factors is related to better growth opportunities for firms and better ability to take advantage of these opportunities.