studied. We argue that this new fact renders obsolete the proposed explanations for the decline in aggregate volatility and …

volatility makes growth options a hedge against aggregate volatility risk. Growth options become less sensitive to the underlying … volatility increases. In empirical tests, the aggregate volatility risk factor explains the idiosyncratic volatility discount and … why it is stronger for growth firms. The aggregate volatility risk factor also partly explains the stronger value effect …

Gabaix, 2011), and (ii) sizable aggregate volatility can arise from idiosyncratic shocks due to input-output linkages across …