However, an alternative interpretation might suggest that the size of the effect is far from trivial. Consider a large, risky project – let us choose as an example the Saturn project undertaken by General Motors some time ago. How much does such a project change the volatility of a firm’s returns? The answer depends on many factors, such as the market’s view of to what extent the success of the project is a signal of the firm’s future growth prospects. But it is not likely we would expect such a project to change GM’s annual volatility from 30% to 50%. .
