Why Does Stock Market Volatility Change Over Time?

Why Does Stock Market Volatility Change Over Time? ABSTRACT This paper analyzes the relation of stock volatility with real and nominal macroeconomic volatility, economic activity, financial leverage, and stock trading activity using monthly data from 1857 to 1987. An important fact, previously noted by Officer (1973), is that stock return variability was unusually high during the 1929–1939 Great Depression. While aggregate leverage is significantly correlated with volatility, it explains a relatively small part of the movements in stock volatility. The amplitude of the fluctuations in aggregate stock volatility is difficult to explain using simple models of stock valuation, especially during the Great Depression. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Why Does Stock Market Volatility Change Over Time?

The Journal of Finance, Volume 44 (5) – Dec 1, 1989

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/lp/wiley/why-does-stock-market-volatility-change-over-time-102ARYWVOD
Publisher
Wiley
Copyright
1989 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
D.O.I.
10.1111/j.1540-6261.1989.tb02647.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT This paper analyzes the relation of stock volatility with real and nominal macroeconomic volatility, economic activity, financial leverage, and stock trading activity using monthly data from 1857 to 1987. An important fact, previously noted by Officer (1973), is that stock return variability was unusually high during the 1929–1939 Great Depression. While aggregate leverage is significantly correlated with volatility, it explains a relatively small part of the movements in stock volatility. The amplitude of the fluctuations in aggregate stock volatility is difficult to explain using simple models of stock valuation, especially during the Great Depression.

Journal

The Journal of FinanceWiley

Published: Dec 1, 1989

References

  • Valuing corporate securities: Some effects of bond indenture provisions
    Black, Black; John, John
  • Large sample properties of generalized method of moments estimators
    Hansen, Hansen
  • The econometric analysis of models with risk terms
    Pagan, Pagan; Aman, Aman
  • The use of volatility measures in assessing market efficiency
    Shiller, Shiller

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