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Why are U.S. stocks more volatile?

Research output: Contribution to journalJournal article

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<mark>Journal publication date</mark>08/2012
<mark>Journal</mark>Journal of Finance
Issue number4
Volume67
Number of pages42
Pages (from-to)1329-1370
Publication statusPublished
Early online date19/07/12
Original languageEnglish

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