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Why Has Idiosyncratic Volatility Increased?

A very interesting reason to study idiosyncratic volatility is that it may tell us quite a bit about the evolution of the firm's investment and financial policies. The purpose of this essay is to investigate the role of evolving investment and financial policies at the firm level as well as other exogenous variables that shape the volatility of idiosyncratic stock returns. In this regard, the essay targets two questions specifically: 1) What firm level charateristics explain the cross section of firm level volatility? 2) How have exogenous variables that shape firm level volatility evolved?