Have individual stocks become more volatile? An empirical exploration of idiosyncratic risk

Article Abstract:

This article examines the volatility of common stocks at the market, firm and industry levels using a disaggregated approach. Results show an increase in the firm-level volatility from 1962-1997; the correlations between individual stocks and the market model's explanatory power has declined, while the number of stocks needed for diversification have increased; finally, market volatility leads the other volatility areas.

Corporations

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Strategic trading in a dynamic noisy market

Article Abstract:

This article examines the decisions of strategic traders in a noisy financial market when they hold an endowment of stock. Results show that after receiving the endowment the trader reduces risk exposure by selling at decreased rates and then buying back shares.

Financial markets, Trading rooms (Finance)

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Predictable stock returns in the United States and Japan: a study of long-term capital market integration

Article Abstract:

This paper uses the predictability of monthly excess returns on U.S. and Japanese equity portfolios over the U.S. Treasury bill rate to study the integration of long-term capital markets in these two countries. During the period 1971-1990 similar variables, including the dividend-price ratio and interest rate variables, help to forecast excess returns in each country. In addition, in the 1980's U.S. variables help to forecast excess Japanese stock returns. There is some evidence of common movement in expected excess returns across the two countries, which is suggestive of integration of long-term capital markets. (Reprinted by permission of the publisher.)

United States, Japan, Capital market, Capital markets, Securities

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