TY - JOUR
T1 - The idiosyncratic volatility puzzle
T2 - Time trend or speculative episodes
AU - Brandt, Michael W.
AU - Brav, Alon
AU - Graham, John R.
AU - Kumar, Alok
N1 - Copyright:
Copyright 2010 Elsevier B.V., All rights reserved.
PY - 2010/2
Y1 - 2010/2
N2 - 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.
AB - 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.
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U2 - 10.1093/rfs/hhp087
DO - 10.1093/rfs/hhp087
M3 - Article
AN - SCOPUS:76549120326
VL - 23
SP - 863
EP - 899
JO - Review of Financial Studies
JF - Review of Financial Studies
SN - 0893-9454
IS - 2
ER -