Faculty Digital Archive

Archive@NYU >
Stern School of Business >
Finance Working Papers >

Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/26975

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

Files in This Item:

File Description SizeFormat
wpa96023.pdf1.44 MBAdobe PDFView/Open

Items in Faculty Digital Archive are protected by copyright, with all rights reserved, unless otherwise indicated.


The contents of the FDA may be subject to copyright, be offered under a Creative Commons license, or be in the public domain.
Please check items for rights statements. For information about NYU’s copyright policy, see http://www.nyu.edu/footer/copyright-and-fair-use.html 
Valid XHTML 1.0 | CSS