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The recent behaviour of financial market volatility

  • Bank for International Settlements
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    This BIS Paper studies the behaviour of financial market volatility since 1970, with special emphasis on the evolution in recent years. Financial market volatility plays an important role in corporate investment decisions and in the willingness and ability of banks to extend credit. This Report emphasises that the reduction in volatility seen in recent years largely represents: the consequence of improvements in the functioning and structure of global financial markets; increased market liquidity; the greater role of institutional investors; better communication between central banks and financial markets; and stronger company balance sheets. The study was prepared by a study group under the Chairmanship of Mr Fabio Panetta of the Bank of Italy.

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    File URL: http://www.bis.org/publ/bppdf/bispap29.pdf
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    File URL: http://www.bis.org/publ/bppdf/bispap29.htm
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    This book is provided by Bank for International Settlements in its series BIS Papers with number 29 and published in 2006.
    ISBN: 92-9131-721-7
    Handle: RePEc:bis:bisbps:29
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    1. Ravi Bansal & Amir Yaron, 2000. "Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles," NBER Working Papers 8059, National Bureau of Economic Research, Inc.
    2. Cassola, Nuno & Morana, Claudio, 2003. "Volatility of interest rates in the euro area: evidence from high frequency data," Working Paper Series 0235, European Central Bank.
    3. Ray Chou & Robert F. Engle & Alex Kane, 1991. "Measuring Risk Aversion From Excess Returns on a Stock Index," NBER Working Papers 3643, National Bureau of Economic Research, Inc.
    4. Pilar Abad & Alfonso Novales, 2004. "Volatility transmission across the term structure of swap markets: international evidence," Applied Financial Economics, Taylor & Francis Journals, vol. 14(14), pages 1045-1058.
    5. Andreou, Elena & Osborn, Denise R & Sensier, Marianne, 2000. "A Comparison of the Statistical Properties of Financial Variables in the USA, UK and Germany over the Business Cycle," Manchester School, University of Manchester, vol. 68(4), pages 396-418, Special I.
    6. Campbell, John Y., 2003. "Consumption-based asset pricing," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 13, pages 803-887 Elsevier.
    7. David, Alexander, 1997. "Fluctuating Confidence in Stock Markets: Implications for Returns and Volatility," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 32(04), pages 427-462, December.
    8. John Y. Campbell & John H. Cochrane, 1994. "By force of habit: a consumption-based explanation of aggregate stock market behavior," Working Papers 94-17, Federal Reserve Bank of Philadelphia.
    9. Richard Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," NBER Working Papers 6442, National Bureau of Economic Research, Inc.
    10. Geert Bekaert & Guojun Wu, 1997. "Asymmetric Volatility and Risk in Equity Markets," NBER Working Papers 6022, National Bureau of Economic Research, Inc.
    11. Ben S. Bernanke & Vincent R. Reinhart, 2004. "Conducting Monetary Policy at Very Low Short-Term Interest Rates," American Economic Review, American Economic Association, vol. 94(2), pages 85-90, May.
    12. Malkiel, Burton & Campbell, John & Lettau, Martin & Xu, Yexiao, 2001. "Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk," Scholarly Articles 3128707, Harvard University Department of Economics.
    13. Ravi Bansal & Hao Zhou, 2002. "Term Structure of Interest Rates with Regime Shifts," Journal of Finance, American Finance Association, vol. 57(5), pages 1997-2043, October.
    14. Bank for International Settlements, 2003. "Incentive structures in institutional asset management and their implications for financial markets," CGFS Papers, Bank for International Settlements, number 21.
    15. Geert Bekaert & Eric Engstrom & Yuhang Xing, 2005. "Risk, uncertainty, and asset prices," Finance and Economics Discussion Series 2005-40, Board of Governors of the Federal Reserve System (U.S.).
    16. George Bittlingmayer, 1998. "Output, Stock Volatility, and Political Uncertainty in a Natural Experiment: Germany, 1880-1940," Journal of Finance, American Finance Association, vol. 53(6), pages 2243-2257, December.
    17. Dynan, Karen E. & Elmendorf, Douglas W. & Sichel, Daniel E., 2006. "Can financial innovation help to explain the reduced volatility of economic activity?," Journal of Monetary Economics, Elsevier, vol. 53(1), pages 123-150, January.
    18. Doron Avramov & Tarun Chordia & Amit Goyal, 2006. "The Impact of Trades on Daily Volatility," Review of Financial Studies, Society for Financial Studies, vol. 19(4), pages 1241-1277.
    19. Juan Ayuso & Andrew Haldane & Fernando Restoy, 1997. "Volatility transmission along the money market yield curve," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(1), pages 56-75, March.
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