NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Gustavo S. Cortes

University of Illinois at Urbana-Champaign
Department of Economics
214 David Kinley Hall
1407 West Gregory Drive
Urbana, IL 61801

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Institutional Affiliation: University of Illinois at Urbana-Champaign

NBER Working Papers and Publications

June 2017Stock Volatility and the Great Depression
with Marc D. Weidenmier: w23554
Stock return volatility during the Great Depression has been labeled a “volatility puzzle” because the standard deviation of stock returns was two to three times higher than any other period in American history (Officer, 1973; Wilson, Sylla, and Jones; 1990). We investigate the “volatility puzzle” using a new series of building permits, a forward-looking measure of economic activity. Our results suggest that the volatility of building permit growth largely explains the high level of stock volatility during the Great Depression. Markets factored in the possibility of a forthcoming economic disaster.

Published: Gustavo S Cortes & Marc D Weidenmier, 2019. "Stock Volatility and the Great Depression," The Review of Financial Studies, vol 32(9), pages 3544-3570.

 
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