Stock Volatility and the Crash of '87
NBER Working Paper No. 2954 (Also Reprint No. r1459)
This paper analyzes the behavior of stock return volatility using daily data from 1885 through 1987. The October 1987 stock market crash was unusual in many ways relative to prior history. In particular, stock volatility jumped dramatically during and after the crash, but it returned to lower. more normal levels quickly. I use data on implied volatilities from call option prices and estimates of volatility from futures contracts on stock indexes to confirm this result.
Published: The Review of Financial Studies, Vol. 3, No. 1, pp. 77-102, 1990.