Firm Age and Fluctuations in Idiosyncratic Risk

Idiosyncratic Risk and REIT Returns

“…Particularly, the idiosyncratic risk of the average REIT fell from 9.3% at the beginning of the study period to 4.7% by the end of the study period, representing a 50% decrease in the idiosyncratic risk of individual REITs between 1990 and 2005. This declining trend, which is contrary to that observed for common stocks (see Xu and Malkiel 2003;Bennett and Sias 2005;Fink et al 2005;Wei and Zhang 2006), can be attributed to the dramatic increase in the average size of REITs after 1990. The average market capitalization of publicly traded REITs grew from just below US$ 100 million prior to 1991 to above US$ 1.5 billion in 2004 (Ooi et al 2007).…”

“…1 are simply due to the increased number of REITs in the sample, we also construct the idiosyncratic volatility 4 The rise in firm-specific risk of common stocks can be attributed to two interacting factors, namely a dramatic increase in the number of new listings and a simultaneous decline in the age of the firm at IPO. Fink et al (2005), in particular, argue that since the equity of young firms typically represents a claim on cash flows that are further into the future, it is not surprising that the idiosyncratic risk of the typical public firm has increased. Xu and Malkiel (2003) further suggest that the rising idiosyncratic volatility is attributed to more institutional ownership and high growth.…”

More than a Fair Share? Principal-Principal Conflicts in Emerging Markets: Evidence from India

“…In 2009, bidders exhibited risk aversion across all deals. Fink, Grullon, Fink, and Weston (2004) have empirically shown that younger firms are risk takers, but our empirical analysis fails to support this view. In fact, the age of the firm has no significant effect on the risk behaviour of its managers (except in one case, Table 3).…”

“…(Note 4). Academic research has shown younger firms are greater risk-takers than the older firms (Fink et al, 2004). Thus, we have considered the "after-1991" age group category provided by prowess as an independent variable to identify younger firms.…”

Do Security Analysts Reduce Noise?

“…First, by concentrating on the changes in noise between preinitiation and postinitiation periods, we effectively isolated the effect of analyst research on noise from the effects of other company characteristics. 3 Second, by focusing on short-run changes, we ensured that our results were less likely to be a reflection of long-run changes in noise owing to marketwide trends in average company age (Fink, Fink, Grullon, and Weston 2007), adoption of new technologies (Pastor and Veronesi 2005), competition (Irvine and Pontiff 2009), or regulation (Brown and Kapadia 2007). Third, by studying changes in noise as a response to changes in analyst coverage, we were better able to establish the causal relationship between these two variables.…”