The Persistence of Volatility and Stock Market Fluctuations
AbstractThis paper examines the potential influence of changing volatility in stock market prices on the level of stock market prices. It demonstrates that volatility is only weakly serially correlated, implying that shocks to volatility do not persist. These shocks can therefore have only a small impact on stockmarket prices, since changes in volatility affect expected required rates of return for relatively short intervals. These findings lead us to be skeptical of recent claims that the stock market's poor performance during the 1970's can be explained by volatility-induced increases in risk premia.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 76 (1986)
Issue (Month): 5 (December)
Other versions of this item:
- James M. Poterba & Lawrence H. Summers, 1987. "The Persistence of Volatility and Stock Market Fluctuations," NBER Working Papers 1462, National Bureau of Economic Research, Inc.
- James M. Poterba & Lawrence H. Summers, 1984. "The Persistence of Volatility and Stock Market Fluctuations," Working papers 353, Massachusetts Institute of Technology (MIT), Department of Economics.
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- Schmalensee, Richard & Trippi, Robert R, 1978. "Common Stock Volatility Expectations Implied by Option Premia," Journal of Finance, American Finance Association, vol. 33(1), pages 129-47, March.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading lists or Wikipedia pages:
- James Poterba in Wikipedia (German)
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