Fashionably Volatile : A Quantitative Study of Stock Volatility in Publicly Listed Luxury and Fast Fashion Firms, 2020-2024

Sammanfattning

In an industry shaped by shifting consumer preferences and economic uncertainty, not all fashion firms are exposed to market risk in the same way. Luxury firms are generally associated with exclusivity, strong brand value, pricing power and high margins, whereas fast fashion firms are characterized by low prices, rapid product turnover, and strong dependence on changing consumer demand. Despite these differences, limited attention has been given to whether they are reflected in stock market volatility. This study therefore examines whether publicly listed luxury firms exhibit lower stock volatility than publicly listed fast fashion firms during 2020-2024, a period marked by the COVID-19 pandemic and subsequent economic uncertainty. The study uses a quantitative, deductive research design based on secondary financial data from eight publicly listed fashion firms, divided equally between luxury and fast fashion segments. Weekly stock returns were used to calculate quarterly stock volatility, resulting in a panel dataset of 160 firm-quarter observations. A pooled OLS regression model was estimated, controlling for firm size, profitability, and year-specific effects. The findings show that luxury firms were associated with lower quarterly stock volatility than fast fashion firms during the studied period. In the final regression model, the luxury variable had a negative and statistically significant relationship with stock volatility, supporting the study’s hypothesis. However, the results should be interpreted with caution, as the relationship was no longer significant when 2020 was excluded from the sample. This suggests that the difference between the two segments was particularly visible during the initial COVID-19 shock and may be most relevant during a period of heightened market uncertainty. The study contributes to research by linking business model differences within the fashion industry to stock market risk. The findings indicate that the fashion industry should not be treated as a uniform market, since segment-specific characteristics such as pricing power, brand strength, demand sensitivity, and operational exposure may help explain differences in stock volatility across firms.