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The recent behaviour of financial market volatility

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  • 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. 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.
    2. John Y. Campbell, 2001. "Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk," Journal of Finance, American Finance Association, vol. 56(1), pages 1-43, 02.
    3. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," The Quarterly Journal of Economics, Oxford University Press, vol. 115(1), pages 147-180.
    4. Karen E. Dynan & Douglas W. Elmendorf & Daniel E. Sichel, 2005. "Can financial innovation help to explain the reduced volatility of economic activity?," Finance and Economics Discussion Series 2005-54, Board of Governors of the Federal Reserve System (U.S.).
    5. 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.
    6. 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.
    7. 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.
    8. Bekaert, Geert & Engstrom, Eric & Xing, Yuhang, 2009. "Risk, uncertainty, and asset prices," Journal of Financial Economics, Elsevier, vol. 91(1), pages 59-82, January.
    9. John Y. Campbell & John H. Cochrane, 1994. "By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," CRSP working papers 412, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    10. Ravi Bansal & Amir Yaron, 2004. "Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles," Journal of Finance, American Finance Association, vol. 59(4), pages 1481-1509, 08.
    11. 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.
    12. 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.
    13. John Y. Campbell, 2002. "Consumption-Based Asset Pricing," Harvard Institute of Economic Research Working Papers 1974, Harvard - Institute of Economic Research.
    14. 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.
    15. 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.
    16. Bekaert, Geert & Wu, Guojun, 2000. "Asymmetric Volatility and Risk in Equity Markets," Review of Financial Studies, Society for Financial Studies, vol. 13(1), pages 1-42.
    17. 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.
    18. 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.
    19. 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, april..
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