Stock Volatility During the Recent Financial Crisis
NBER Working Paper No. 16976
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.
Document Object Identifier (DOI): 10.3386/w16976
Published: "Stock Volatility during the Recent Financial Crisis" NBER Working Paper No. W16976, European Financial Management, 17 (2011) 789-805
Users who downloaded this paper also downloaded* these: