NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Why Does Stock Market Volatility Change Over Time?

G. William Schwert

NBER Working Paper No. 2798 (Also Reprint No. r1368)
Issued in March 1990
NBER Program(s):   ME

This paper analyzes the relation of stock volatility with real and nominal macroeconomic volatility, financial leverage, stock trading activity, default risk, and firm profitability using monthly data from 1857-1986. An important fact, previously noted by Officer [l973], is that stock return variability was unusually high during the 1929-1940 Great Depression. Moreover, leverage has a relatively small effect on stock volatility. The amplitude of the fluctuations in aggregate stock volatility is difficult to explain using simple models of stock valuation.

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Document Object Identifier (DOI): 10.3386/w2798

Published: The Journal of Finance, Vol. XLIV, No. 5, pp. 1115-1153, (December 1989). citation courtesy of

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