What determines the differences in idiosyncratic volatility between Swedish firms and comparable European firms?

Sammanfattning: Firms’ stock return volatility varies across countries, and the factors driving the volatility can contribute both positively and negatively to economic growth. We show that across 3,673 firms during the time interval 2001 to 2016, stocks of Swedish firms have on average lower volatility compared to stocks of foreign European firms of similar size, age, and market-to-book value. The lower volatility for Swedish firms is more distinct and persistent in idiosyncratic volatility compared to systematic volatility. Further, our results indicate that the difference in idiosyncratic volatility is explained by Sweden having greater equity market development and less country risk compared to other European countries.