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Why Did Individual Stocks Become More Volatile?

Author

Listed:
  • Steven X. Wei

    (Hong Kong Polytechnic University)

  • Chu Zhang

    (Hong Kong University of Science and Technology)

Abstract

We investigate why individual stocks become more volatile over the 1976–2000 period, during which quarterly accounting data are available at the firm level. On average, corporate earnings have deteriorated and their volatilities have increased over the sample period. This is more evident for newly listed stocks than for existing stocks. The stock return volatility is negatively related to the return-on-equity and positively related to the volatility of the return-on-equity in cross-sections. The upward trend in average stock return volatility is fully accounted for by the downward trend in the return-on-equity and the upward trend in the volatility of the return-on-equity.

Suggested Citation

  • Steven X. Wei & Chu Zhang, 2006. "Why Did Individual Stocks Become More Volatile?," The Journal of Business, University of Chicago Press, vol. 79(1), pages 259-292, January.
  • Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:1:p:259-292
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