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Why are U.S. Stocks More Volatile?

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  • Bartram, Söhnke M.
  • Brown, Gregory W.
  • Stulz, René M.

Abstract

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 U.S. because it increases with investor protection, stock market development, new patents, and firm-level investment in R&D. Each of these factors are related to better growth opportunities for firms and better ability to take advantage of these opportunities.

Suggested Citation

  • Bartram, Söhnke M. & Brown, Gregory W. & Stulz, René M., 2012. "Why are U.S. Stocks More Volatile?," MPRA Paper 47341, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:47341
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    More about this item

    Keywords

    Firm risk; volatility; idiosyncratic risk; R-squared;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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