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Speculative Trading and Stock Market Volatility

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  • Jones, Johnathan D.
  • Mulherin, J. Harold
  • Titman, Sheridan

Abstract

This paper examines whether speculative activity has an effect on stock market volatility. With data from 1919 to 1987, we analyze the relation between stock return volatility, estimated from the daily Dow Jones price index, and indicators of speculative activity, including expected share turnover and the growth rate in margin credit. The analysis finds no destabilizing effect of speculation in the post-World War II period or in the period prior to the 1929 Crash. However, we do find evidence of a relation between speculation and volatility during 1934-36, a period in which prior research has found significant mean reversion in stock returns. -FOR REFERENCES GO HERE: http://www.anderson.ucla.edu/acad_unit/finance/wp/1990/18-90app.pdf

Suggested Citation

  • Jones, Johnathan D. & Mulherin, J. Harold & Titman, Sheridan, 1990. "Speculative Trading and Stock Market Volatility," University of California at Los Angeles, Anderson Graduate School of Management qt6kb972xv, Anderson Graduate School of Management, UCLA.
    • Handle: RePEc:cdl:anderf:qt6kb972xv
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