IDEAS home Printed from https://ideas.repec.org/p/wop/pennin/97-51.html
   My bibliography  Save this paper

Stock Market Volatility: Ten Years After the Crash

Author

Listed:
  • G. William Schwert

Abstract

Stock volatility has been unusually low since the 1987 stock market crash. The large increase in stock prices since 1987 means that many days during 1996 and 1997 experienced near record changes in the Dow Jones Industrial Average, even though the volatility of stock returns has not been high by historical standards. I compare volatility of returns to U.S. stock indexes at monthly, daily, and intraday intervals, and I also show the volatility of returns to stock indexes implied by traded options contracts. Finally, I compare the volatility of U.S. stock market returns with the volatility of returns to stock markets in the United Kingdom Australia, and Canada. All of the evidence leads to the conclusion that volatility has been very low in the decade since the 1987 crash. The mini-crash of October 27 to reevaluate the current system of circuit breakers so that they are triggered less easily. Part of the problem is caused by trigger points that are expressed as absolute changes in market indexes.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • G. William Schwert, 1997. "Stock Market Volatility: Ten Years After the Crash," Center for Financial Institutions Working Papers 97-51, Wharton School Center for Financial Institutions, University of Pennsylvania.
  • Handle: RePEc:wop:pennin:97-51
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Barro, Robert J, 1990. "The Stock Market and Investment," Review of Financial Studies, Society for Financial Studies, vol. 3(1), pages 115-131.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ole E. Barndorff-Nielsen & Neil Shephard, 2005. "Variation, jumps, market frictions and high frequency data in financial econometrics," Economics Papers 2005-W16, Economics Group, Nuffield College, University of Oxford.
    2. Charles, Amélie & Darné, Olivier, 2014. "Large shocks in the volatility of the Dow Jones Industrial Average index: 1928–2013," Journal of Banking & Finance, Elsevier, vol. 43(C), pages 188-199.
    3. Ole E. Barndorff-Nielsen & Neil Shephard, 2002. "Estimating quadratic variation using realized variance," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(5), pages 457-477.
    4. Barndorff-Nielsen, Ole E. & Graversen, Svend Erik & Jacod, Jean & Shephard, Neil, 2006. "Limit Theorems For Bipower Variation In Financial Econometrics," Econometric Theory, Cambridge University Press, vol. 22(04), pages 677-719, August.
    5. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Paul Labys, 1999. "(Understanding, Optimizing, Using and Forecasting) Realized Volatility and Correlation," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-061, New York University, Leonard N. Stern School of Business-.
    6. Matthew C. Li, 2014. "The US zero-coupon yield spread as a predictor of excess daily stock market volatility," Applied Financial Economics, Taylor & Francis Journals, vol. 24(13), pages 889-906, July.
    7. Weiyu Guo & Mark E. Wohar, 2006. "Identifying Regime Changes In Market Volatility," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 29(1), pages 79-93.
    8. Andersen, Torben G. & Bollerslev, Tim & Lange, Steve, 1999. "Forecasting financial market volatility: Sample frequency vis-a-vis forecast horizon," Journal of Empirical Finance, Elsevier, vol. 6(5), pages 457-477, December.
    9. Li, Tao, 2007. "Heterogeneous beliefs, asset prices, and volatility in a pure exchange economy," Journal of Economic Dynamics and Control, Elsevier, vol. 31(5), pages 1697-1727, May.
    10. Peter N. Smith & Steffen Sorensen & Michael Wickens, 2010. "The equity premium and the business cycle: the role of demand and supply shocks," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 15(2), pages 134-152.
    11. Raphael Hekimian & David Le Bris, 2016. "US Crashes of 2008 and 1929 How did the French market react? An empirical study," EconomiX Working Papers 2016-21, University of Paris Nanterre, EconomiX.
    12. Charles P. Jones & Mark D. Walker & Jack W. Wilson, 2004. "Analyzing Stock Market Volatility Using Extreme-Day Measures," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 27(4), pages 585-601.
    13. Gamini Premaratne & Lakshmi Bala, 2004. "Stock Market Volatility: Examining North America, Europe and Asia," Econometric Society 2004 Far Eastern Meetings 479, Econometric Society.
    14. Engle, Robert F. & Gallo, Giampiero M., 2006. "A multiple indicators model for volatility using intra-daily data," Journal of Econometrics, Elsevier, vol. 131(1-2), pages 3-27.
    15. Costa, Jose Carlos & Mata, Maria Eugenia & Justino, David, 2009. "Portuguese Average Cost Of Capital," FEUNL Working Paper Series wp543, Universidade Nova de Lisboa, Faculdade de Economia.
    16. Vortelinos, Dimitrios I. & Thomakos, Dimitrios D., 2013. "Nonparametric realized volatility estimation in the international equity markets," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 34-45.
    17. Ole E. Barndorff-Nielsen & Neil Shephard, 2001. "Estimating quadratic variation using realised volatility," Economics Papers 2001-W20, Economics Group, Nuffield College, University of Oxford, revised 01 Nov 2001.
    18. Zhang, Yiting & Lee, Gladys Hui Ting & Wong, Jian Cheng & Kok, Jun Liang & Prusty, Manamohan & Cheong, Siew Ann, 2011. "Will the US economy recover in 2010? A minimal spanning tree study," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(11), pages 2020-2050.

    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wop:pennin:97-51. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel). General contact details of provider: http://edirc.repec.org/data/fiupaus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.