Volatility in World Equity Markets

Steven J. Cochran (), Jean L. Heck () and David R. Shaffer ()
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Steven J. Cochran: Department of Finance, College of Commerce and Finance, 800 Lancaster Avenue, Villanova, PA 19085, USA
Jean L. Heck: Department of Finance, College of Commerce and Finance, 800 Lancaster Avenue, Villanova, PA 19085, USA
David R. Shaffer: Department of Finance, College of Commerce and Finance, 800 Lancaster Avenue, Villanova, PA 19085, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2003, vol. 06, issue 03, 273-290

Abstract: Past research suggests that US stock market volatility was greater during the 1930s than in any other 10-year time period and the post-WWII era is a period of relative stability, despite slightly higher volatility levels during the 1970s and 1980s. More recent evidence suggests that volatility levels from 1998 to 2001 have more in common with 1930s levels than with any other time period. We extend this body of research to include the volatility experiences of seven equity markets in the US, Europe, and Asia. For each market, we compare the average monthly volatility of each five-year period, beginning with January 1923, with that for the most recent period in the study, January 1998 to August 2001. We find that when there are statistical differences between current and past levels of volatility, recent volatility is usually significantly greater than past volatility. In only a small number of cases do we find current volatility to be less than past volatility. This suggests that the 1998–2001 period was unusually volatile for most markets examined. We also find that volatility behavior tends to be country-specific and cannot be generalized on an aggregate basis.

Keywords: Market volatility; world equity markets (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2003
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DOI: 10.1142/S0219091503001092

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