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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26975
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| Title: | Relative Valuation, Differential Information, and Cross-sectional
Differences in Stock Return Volatility |
| Authors: | Allan, Eberhart
Damodaran, Aswath |
| Issue Date: | Jan-1997 |
| Series/Report no.: | FIN-96-023 |
| Abstract: | Many studies argue that differences in information across securities
explain much of the cross-sectional variation in stock return
volatility. We offer an explanation beyond that previously identified in
the literature by developing a proxy for differential information. Our
proxy follows from our simple model development where the amount of
information regarding a firm is positively related to how similar it is
to its comparables (i.e., firms in the same industry). We call this
measure of differential information the degree of comparability. In all
our empirical tests, we consistently find a negative and highly
significant relationship between volatility and the degree of
comparability (after controlling for other factors the literature has
found affect volatility). Moreover, in some tests, the degree of
comparability is the most significant factor in explaining volatility. |
| URI: | http://hdl.handle.net/2451/26975 |
| Appears in Collections: | Finance Working Papers
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