Business Cycles, Financial Crises, and Stock Volatility
This paper shows that stock volatility increases during recessions and financial crises from 1834-1987. The evidence reinforces the notion that stock prices are an important business cycle indicator. Using two different statistical models for stock volatility, I show that volatility increases after major financial crises. Moreover. stock volatility decreases and stock prices rise before the Fed increases margin requirements. Thus, there is little reason to believe that public policies can control stock volatility. The evidence supports the observation by Black  that stock volatility increases after stock prices fall.
|Date of creation:||May 1989|
|Publication status:||published as Carnegie-Rochester Conference Series on Public Policy, Vol. 31, pp. 83-125, (1989).|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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