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Stock Volatility And The Crash Of '87

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  • SCHWERT, G.W.

Abstract

This article analyzes the behavior of stock return volatility using daily data from 1885 through 1988. The October 1987 stock market crash was unusual in many ways. October 19 was the largest percentage change in market value in over 29,000 days. Stock volatility jumped dramatically during and after the crash. Nevertheless, it returned to lower, more normal levels more quickly than past experience predicted. The author uses data on implied volatilities from call option prices and estimates of volatility from futures contracts on stock indexes to confirm this result. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.
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Suggested Citation

  • Schwert, G.W., 1989. "Stock Volatility And The Crash Of '87," Papers 89-01, Rochester, Business - General.
    • Handle: RePEc:fth:robuge:89-01
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    as
    1. Keim, Donald B & Stambaugh, Robert F, 1984. "A Further Investigation of the Weekend Effect in Stock Returns," Journal of Finance, American Finance Association, vol. 39(3), pages 819-835, July.
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