Comparing Different Explanations of the Volatility Trend

We analyze the puzzling behavior of the volatility of individual stock returns over the past few decades. The literature has provided many different explanations to the trend in volatility and this paper tests the viability of the different explanations. Virtually all current theoretical arguments that are provided for the trend in the average level of volatility over time lend themselves to explanations about the difference in volatility levels between firms in the cross-section. We therefore focus separately on the crosssectional and time-series explanatory power of the different proxies. We fail to find a proxy that is able to explain both dimensions well. In particular, we find that Cao et al. (2008) market-to-book ratio tracks average volatility levels well, but has no crosssectional explanatory power. On the other hand, the low-price proxy suggested by Brandt et al. (2010) has much cross-sectional explanatory power, but has virtually no time-series explanatory power. We also find that the different proxies do not explain the trend in volatility in the period prior to 1995 (R-squared of virtually zero), but explain rather well the trend in volatility at the turn of the Millennium (1995-2005).Volatility; Trend; Turnover

The Impact of Modality Expectancy on Memory Accuracy for Brand Names

It is proposed that an individual’s expectations regarding the modality by which to-be-remembered brand names will be communicated in the future can impact memory accuracy for those brand names. Specifically, we hypothesize that the likelihood of malapropistic errors (i.e., false recognition of phonetically similar brand names) increases with greater attention to phonemic codes relative to orthographic codes. Attention to these memorial representations is driven by expectations as to whether retrieval will be written or spoken. When visually presented with brand names, those expecting text-based retrieval pay relatively greater attention to the visual forms or orthographies of brand names, as this information is necessary for successful written reproduction. Individuals expecting to orally communicate brand names discount the orthographic information at encoding in favor of internally generated phonetic representations (i.e., the way the brand names sound when spoken), as the spellings of the brand names are immaterial for successful spoken reproduction. The formats by which stimuli are presented (i.e., sequentially vs. simultaneously) are shown to interact in predictable ways with modality expectancies, such that mere exposure effects are maximized only when presentation format is optimal for a specific expected modality—sequentially when spoken recall is expected and simultaneously when written recall is expected. These conditions generate relatively high-quality memorial representations, which result in relative metacognitive ease of retrieval on subsequent recognition tasks. Consequently, downstream variables including purchase likelihood and willingness-to-pay for products featuring those brand names can be impacted via this perceptual fluency