Stock Volatility During the Recent Financial Crisis
32 Pages Posted: 25 Apr 2011 Last revised: 22 May 2022
There are 2 versions of this paper
Stock Volatility During the Recent Financial Crisis
Date Written: April 2011
Abstract
This paper uses monthly returns from 1802-2010, daily returns from 1885-2010, and intraday returns from 1982-2010 in the United States to show how stock volatility has changed over time. It also uses various measures of volatility implied by option prices to infer what the market was expecting to happen in the months following the financial crisis in late 2008. This episode was associated with historically high levels of stock market volatility, particularly among financial sector stocks, but the market did not expect volatility to remain high for long and it did not. This is in sharp contrast to the prolonged periods of high volatility during the Great Depression. Similar analysis of stock volatility in the United Kingdom and Japan reinforces the notion that the volatility seen in the 2008 crisis was relatively short-lived. While there is a link between stock volatility and real economic activity, such as unemployment rates, it can be misleading.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
By Javier Mencia and Enrique Sentana
-
Idiosyncratic Return Volatility in the Cross-Section of Stocks
By Namho Kang, Peter Kondor, ...
-
Investor Horizons and Corporate Cash Holdings
By Jarrad Harford, Ambrus Kecskes, ...
-
Changing Institutional Preferences for Stocks: Direct and Indirect Evidence
By Marshall E. Blume and Donald B. Keim
-
Idiosyncratic Volatility, Institutional Ownership, and Investment Horizon
By Doina Chichernea, Alex Petkevich, ...
-
By Gazi Salah Uddin, Mohamed El Hedi Arouri, ...