Can Environmental Volatility Be Measured Objectively?

Abstract

The article presents findings of a study which measured market, technological and earnings volatility using data from Standard and Poor's Compustat Tapes. In 1973, Tosi, Aldag, and Storey raised questions concerning the validity of the Lawrence and Lorsch instrument in particular and the assumption that measures of top managers' perceptions of uncertainty are surrogate measures of environmental volatility in general. Tosi, Aldag, and Storey suggested that it should be possible to publish regularly a listing of volatility measures for all industries. This listing would facilitate the comparison of industries in terms of volatility, and it would provide valuable information for executives who must make decisions in the face of changing environmental conditions.