Aggregate volatility expectations and threshold CAPM

Corporate Governance and Aggregate Volatility ∗

This paper argues that firms adapt their mode of governance to market conditions, and that this may help us understand the business cycle. I focus on the extent of insiders’ control over firm’s decisions. The delegation of control to insiders fosters initiative but it also gives them the opportunity to expand their firm beyond the profit-maximizing size. This type of behavior has very different...

AGGREGATE IDIOSYNCRATIC VOLATILITY Geert

We examine aggregate idiosyncratic volatility in 23 developed equity markets, measured using various methodologies, and we find no evidence of upward trends. Instead, idiosyncratic volatility appears to be well described by a stationary autoregressive process that occasionally switches into a higher-variance regime that has relatively short duration. We also document that idiosyncratic volatili...

Appendix to An Intertemporal CAPM with Stochastic Volatility

Threshold behavior and aggregate fluctuation

This paper concerns a propagation mechanism in an economy where many individuals follow a threshold rule and interact with a positive feedback. We derive an asymptotic distribution of the propagation size when the number of the agents tends to infinity. The propagation distribution exhibits a slower convergence to a deterministic value than it would if the agents followed a smooth adjustment po...

Institutional Ownership and Aggregate Volatility Risk

The paper shows that the difference in aggregate volatility risk can explain why several anomalies are stronger among the stocks with low institutional ownership (IO). Because of their desire to hedge against aggregate volatility or to exploit their competitive advantage in obtaining and processing information, coupled with the dislike of uncertainty and volatility, institutions tend to stay aw...