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Stock returns and volatility a firm-level analysis

Journal of Financial Economics 1995 37(3), 399-420
It has been previously documented that individual firms' stock return volatility rises after stock prices fall. This paper finds that this statistical relation is largely due to a positive contemporaneous relation between firm stock returns and firm stock return volatility. This positive relation is strongest for both small firms and firms with little financial leverage. At the aggregate level, the sign of this contemporaneous relation is reversed. The reasons for the difference between the aggregate- and firm-level relations are explored.