Warwick Buisiness School
Department of Finance
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Fax: +1 (425) 952 1070
Information about this author at RePEc
NBER Working Papers and Publications
|August 2016||Why Does Idiosyncratic Risk Increase with Market Risk?|
with Gregory Brown, René M. Stulz: w22492
From 1963 through 2015, idiosyncratic risk (IR) is high when market risk (MR) is high. We show that the positive relation between IR and MR is highly stable through time and is robust across exchanges, firm size, liquidity, and market-to-book groupings. Though stock liquidity affects the strength of the relation, the relation is strong for the most liquid stocks. The relation has roots in fundamentals as higher market risk predicts greater idiosyncratic earnings volatility and as firm characteristics related to the ability of firms to adjust to higher uncertainty help explain the strength of the relation. Consistent with the view that growth options provide a hedge against macroeconomic uncertainty, we find evidence that the relation is weaker for firms with more growth options.
|April 2009||Why Do Foreign Firms Have Less Idiosyncratic Risk than U.S. Firms?|
with Gregory Brown, René M. Stulz: w14931
Using a large panel of firms across the world from 1991-2006, we show that the median foreign firm has lower idiosyncratic risk than a comparable U.S. firm. Country characteristics help explain variation in the level of idiosyncratic risk, but less so than firm characteristics. Idiosyncratic risk falls as government stability and respect for the rule of law improve. Idiosyncratic risk is positively related to stock market development but negatively related to bond market development. Surprisingly, we find that idiosyncratic risk is generally negatively related to corporate disclosure quality. Finally, idiosyncratic risk generally increases with shareholder protection. Though there is evidence that R2 increases with creditor rights and falls with the quality of disclosure, these ...
Published: Why Are U.S. Stocks More Volatile? SÖHNKE M. BARTRAM, GREGORY BROWN, RENÉ M. STULZ† Article first published online: 19 JUL 2012 DOI: 10.1111/j.1540-6261.2012.01749.x © 2012 The American Finance Association Issue The Journal of Finance The Journal of Finance Volume 67, Issue 4, pages 1329–1370, August 2012