Idiosyncratic Equity Risk Two Decades Later / John Y. Campbell, Martin Lettau, Burton G. Malkiel, Yexiao Xu.

Format:

Book

Author/Creator:

Campbell, John Y.

Contributor:

National Bureau of Economic Research.

Lettau, Martin.

Malkiel, Burton G.

Xu, Yexiao.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29916.

NBER working paper series no. w29916

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

This paper reviews the literature on idiosyncratic equity volatility since the publication of "Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk" in 2001. We respond to replication studies by Chiah, Gharghori, and Zhong and by Leippold and Svaton, and we present volatility estimates through the end of 2021, significantly extending the period covered in our original paper as well as the two replication studies. After spiking in the 1999- 2000 period, idiosyncratic volatility declined thereafter; but sharp increases in market, industry, and idiosyncratic volatility occurred during the global financial crisis of 2008-2009 and the COVID-19 pandemic of 2020-2021. We argue that market microstructure effects are not of first-order importance for volatility measurement, and we discuss the roles of fundamental factors and investor sentiment in driving the observed fluctuations in volatility.

Notes:

Print version record

April 2022.