Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 22, 2023 erstellt
Beschreibung:
Recent research provides empirical evidence that investors’ tendency to think in non-proportional terms not only drives a significant fraction of stock return volatility, but also subsumes the well-documented size–volatility relation. After carefully addressing critical inference and methodological concerns, we show that (i) volatility remains strongly negatively correlated with firm size, and (ii) the apparent evidence consistent with the predictions of non-proportional thinking disappears. We validate the latter result by showing that rational factors can explain the long-standing post-split volatility puzzle. Overall, our findings highlight the role of fundamentals in volatility and call into question the idea that non-proportional thinking affects financial markets