Stock volatility in the periods of booms and stagnations
AbstractThe aim of this paper is to compare statistical properties of stock price indices in periods of booms with those in periods of stagnations. We use the daily data of the four stock price indices in the major stock markets in the world: (i) the Nikkei 225 index (Nikkei 225) from January 4, 1975 to August 18, 2004, of (ii) the Dow Jones Industrial Average (DJIA) from January 2, 1946 to August 18, 2004, of (iii) Standard and Poor’s 500 index (SP500) from November 22, 1982 to August 18, 2004, and of (iii) the Financial Times Stock Exchange 100 index (FT 100) from April 2, 1984 to August 18, 2004. We divide the time series of each of these indices in the two periods: booms and stagnations, and investigate the statistical properties of absolute log return, which is a typical measure of volatility, for each period. We find that (i) the tail of the distribution of the absolute log-returns is approximated by a power-law function with the exponent close to 3 in the periods of booms while the distribution is described by an exponential function with the scale parameter close to unity in the periods of stagnations.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 23727.
Date of creation: 25 Jun 2010
Date of revision:
volatility; boom; and stagnation; stock price indices;
Other versions of this item:
- Taisei Kaizoji, 2010. "Stock volatility in the periods of booms and stagnations," EERI Research Paper Series EERI_RP_2010_07, Economics and Econometrics Research Institute (EERI), Brussels.
- C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
- D30 - Microeconomics - - Distribution - - - General
- G19 - Financial Economics - - General Financial Markets - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-17 (All new papers)
- NEP-FMK-2010-07-17 (Financial Markets)
- NEP-RMG-2010-07-17 (Risk Management)
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