Why Are U.S. Stocks More Volatile?





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    • Bartram is with Warwick Business School; Brown is with the Kenan-Flagler Business School, The University of North Carolina at Chapel Hill; and Stulz is with the Fisher College of Business, The Ohio State University, NBER, and ECGI. The authors are grateful for comments from Geert Bekaert, Hendrik Bessembinder, Gian Luca Clementi, Nuno Fernandes, Cam Harvey, Patrick Kelly, Christian Lundblad, David MacLean, Richard Roll, Omid Sabbaghi, and Piet Sercu as well as from seminar participants at the American Finance Association Meetings, European Finance Meetings, the 2009 FIRS Conference, HEC-Paris, The University of Calgary, The University of North Carolina, UCLA, and the University of South Florida. Financial support by Inquire United Kingdom is gratefully acknowledged. William Waller provided excellent research assistance.


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.