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Clinical Trials and Stock Return Volatility

Rennmark, Axel LU and Fransson Höglander, Jonathan LU (2026) NEKH02 20252
Department of Economics
Abstract
Clinical trials represent events that drive volatility in the biopharmaceutical sector through their binary characteristics, creating unique challenges for risk assessment. The study examines what factors drive stock return volatility for the top 25 US-listed biopharma companies around the release of clinical trial results. Analyzing 3380 clinical trial events between 2010-2020, this study employs a pooled OLS approach on an unbalanced panel of firm-event observations. We utilize five model specifications to examine how market-, firm- and trial-specific variables, available prior to announcement, drive stock return volatility. Our findings indicate that market conditions are the primary determinants of event-window volatility. The results... (More)
Clinical trials represent events that drive volatility in the biopharmaceutical sector through their binary characteristics, creating unique challenges for risk assessment. The study examines what factors drive stock return volatility for the top 25 US-listed biopharma companies around the release of clinical trial results. Analyzing 3380 clinical trial events between 2010-2020, this study employs a pooled OLS approach on an unbalanced panel of firm-event observations. We utilize five model specifications to examine how market-, firm- and trial-specific variables, available prior to announcement, drive stock return volatility. Our findings indicate that market conditions are the primary determinants of event-window volatility. The results support both volatility clustering and the information asymmetry hypotheses. Furthermore, while oncology trials are generally associated with lower volatility, we found that this stabilizing effect diminishes as trial duration increases. (Less)
Please use this url to cite or link to this publication:
author
Rennmark, Axel LU and Fransson Höglander, Jonathan LU
supervisor
organization
course
NEKH02 20252
year
type
M2 - Bachelor Degree
subject
keywords
Biotech, Pharmaceuticals, Stock Return Volatility, Clinical Trials, Panel Data
language
English
id
9221004
date added to LUP
2026-02-04 08:22:15
date last changed
2026-02-04 08:22:15
@misc{9221004,
  abstract     = {{Clinical trials represent events that drive volatility in the biopharmaceutical sector through their binary characteristics, creating unique challenges for risk assessment. The study examines what factors drive stock return volatility for the top 25 US-listed biopharma companies around the release of clinical trial results. Analyzing 3380 clinical trial events between 2010-2020, this study employs a pooled OLS approach on an unbalanced panel of firm-event observations. We utilize five model specifications to examine how market-, firm- and trial-specific variables, available prior to announcement, drive stock return volatility. Our findings indicate that market conditions are the primary determinants of event-window volatility. The results support both volatility clustering and the information asymmetry hypotheses. Furthermore, while oncology trials are generally associated with lower volatility, we found that this stabilizing effect diminishes as trial duration increases.}},
  author       = {{Rennmark, Axel and Fransson Höglander, Jonathan}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Clinical Trials and Stock Return Volatility}},
  year         = {{2026}},
}