The Importance of Profitability in Determining Volatility Across Industries with Different Debt Levels

Authors

Timothy de Silva, Claremont McKenna CollegeFollow

Abstract

This paper seeks to investigate the relationship between debt and volatility. No consensus currently exists on the effects of financial leverage on stock volatility. With the increased use of complex financial derivatives in recent decades, the importance of understanding the factors that influence volatility has become extremely important. By looking at a cross-section of industries, this paper demonstrates how the importance of profitability for explaining volatility changes depending on industry debt levels, which are endogenous and depend on industry characteristics.

Recommended Citation

de Silva, Timothy (2016) "The Importance of Profitability in Determining Volatility Across Industries with Different Debt Levels," Undergraduate Economic Review: Vol. 13: Iss. 1, Article 12.
Available at: https://digitalcommons.iwu.edu/uer/vol13/iss1/12