Stock Market Volatility: Ten Years After the Crash

G. Schwert

No 6381, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: G14 (search for similar items in EconPapers)
Date: 1998-01
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

Published as Schwert, G. William. "Stock Market Volatility: Ten Years after the Crash." Brookings-Wharton Papers on Financial Services (1998): 65-99.

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Working Paper: Stock Market Volatility: Ten Years After the Crash (1997)
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