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    Firm life cycle and idiosyncratic volatility

    Access Status
    Fulltext not available
    Authors
    Hasan, Mostafa
    Habib, A.
    Date
    2016
    Type
    Journal Article
    
    Metadata
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    Citation
    Hasan, M. and Habib, A. 2016. Firm life cycle and idiosyncratic volatility. International Review of Financial Analysis. 50: pp. 164-175.
    Source Title
    International Review of Financial Analysis
    DOI
    10.1016/j.irfa.2017.01.003
    ISSN
    1057-5219
    School
    Department of Finance and Banking
    URI
    http://hdl.handle.net/20.500.11937/50008
    Collection
    • Curtin Research Publications
    Abstract

    This paper investigates the association between idiosyncratic volatility and firm life cycle stages. Since firm performance and availability of information vary across life cycle stages, and such variation affects uncertainty about future cash flows and stock returns, we argue that idiosyncratic volatility also varies across firm life cycle stages. Using US data, this study shows that idiosyncratic volatility is significantly higher in the introduction and decline stages, and significantly lower in the growth and mature stages, when compared to that in the shake-out stage. Our study also reveals that the roles of both cash flow volatility and information uncertainty in affecting idiosyncratic volatility vary depending on firm life cycle stages. Our results are robust to alternative specifications of life cycle proxies and idiosyncratic volatility, and to an alternative regression specification.

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