Yexiao Xu

School of Management
University of Texas at Dallas
Richardson, TX 75083

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Institutional Affiliation: University of Texas

NBER Working Papers and Publications

April 2003Idiosyncratic Risk and the Creative Destruction in Japan
with Yasushi Hamao, Jianping Mei: w9642
The dramatic rise and fall of the Japanese equity market provides a unique opportunity to examine market-and firm-specific risks over different market conditions. The price behavior of Japanese equities in the 1990s is found to resemble that of U.S. equities during the Great Depression. Both show increasing market volatility and a prolonged large co-movement in equity prices. What is unique about the Japanese case is the surprising fall in firm-level volatility and turnover in Japanese stocks after its market crash in 1990. This large decrease in firm-level volatility may have impeded Japan's capital formation process as it has become more difficult over the past decade for both investors and managers to separate high quality from low quality firms. Using data on firm performance fundament...
March 2000Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk
with John Y. Campbell, Martin Lettau, Burton G. Malkiel: w7590
This paper uses a disaggregated approach to study the volatility of common stocks at the market, industry, and firm levels. Over the period 1962-97 there has been a noticeable increase in firm-level volatility relative to market volatility. Accordingly correlations among individual stocks and the explanatory power of the market model for a typical stock have declined, while the number of stocks needed to achieve a given level of diversification has increased. All the volatility measures move together countercyclically and help to predict GDP growth. Market volatility tends to lead the other volatility series. Factors that may be responsible for these findings are suggested.

Published: Campbell, John Y., Martin Lettau, Burton G. Malkiel and Yexiao Xu. "Have Individual Stocks Become More Volatile? An Empirical Exploration Of Idiosyncratic Risk," Journal of Finance, 2001, v56(1,Feb), 1-43. citation courtesy of

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