The idiosyncratic volatility puzzle: Time trend or speculative episodes
Journal Article (Journal Article)
Campbell, Lettau, Malkiel, and Xu (2001) document a positive trend in idiosyncratic volatility during the 1962-1997 period. We show that by 2003 volatility falls back to pre-1990s levels. Furthermore, we show that the increase and subsequent reversal is concentrated among firms with low stock prices and high retail ownership. This evidence suggests that the increase in idiosyncratic volatility through the 1990s was not a time trend but, rather, an episodic phenomenon, at least partially associated with retail investors. Results from cross-sectional regressions, conditional trend estimation, stock-split events, and "attention-grabbing" events are consistent with a retail trading effect.
Full Text
Duke Authors
Cited Authors
- Brandt, MW; Brav, A; Graham, JR; Kumar, A
Published Date
- February 1, 2010
Published In
Volume / Issue
- 23 / 2
Start / End Page
- 863 - 899
Electronic International Standard Serial Number (EISSN)
- 1465-7368
International Standard Serial Number (ISSN)
- 0893-9454
Digital Object Identifier (DOI)
- 10.1093/rfs/hhp087
Citation Source
- Scopus