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The explanatory power of idiosyncratic volatility is examined in the context of the dynamics of market volatility. Results based on high frequency individual Standard & Poor's (S&P) 100 stock data indicate that aggregate idiosyncratic volatility has a significant and persistent impact on market volatility (and vice versa). Furthermore, we show that this explanatory power improves as one increases the number of stocks used to construct idiosyncratic volatility.
