Abstract
This study provides a rigorous examination of historical stock price volatility. We measure changes in the variability of equity returns on a daily and monthly basis and test whether volatility has changed over the period 1926 through 2014. Our results are of importance to practitioners, individual investors, policy makers, and the press and address the widely held perception among market participants and the general public that stock market volatility has increased over time. Our results suggest this belief is accurate, but only when volatility is measured on a daily basis. When measured using monthly increments, there has been no discernable change in return volatility. This is likely good news for both traders and investors. Traders are active on a daily basis and can profit from larger movements in the market, thus the slight increase in daily volatility is likely both important to them and viewed positively. Long term investors can take comfort that many of the large daily price declines are at least partially offset by similar price increases and that, when measured over longer periods, volatility has not increased.
| Original language | English |
|---|---|
| Pages (from-to) | 71-82 |
| Number of pages | 12 |
| Journal | Journal of Wealth Management |
| Volume | 19 |
| Issue number | 1 |
| DOIs | |
| State | Published - Jun 1 2016 |
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All Science Journal Classification (ASJC) codes
- Economics and Econometrics
- Finance
Cite this
The increasing volatility of the stock market? / Washer, Kenneth M.; Jorgensen, Randy; Johnson, Robert R.
In: Journal of Wealth Management, Vol. 19, No. 1, 01.06.2016, p. 71-82.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - The increasing volatility of the stock market?
AU - Washer, Kenneth M.
AU - Jorgensen, Randy
AU - Johnson, Robert R.
PY - 2016/6/1
Y1 - 2016/6/1
N2 - This study provides a rigorous examination of historical stock price volatility. We measure changes in the variability of equity returns on a daily and monthly basis and test whether volatility has changed over the period 1926 through 2014. Our results are of importance to practitioners, individual investors, policy makers, and the press and address the widely held perception among market participants and the general public that stock market volatility has increased over time. Our results suggest this belief is accurate, but only when volatility is measured on a daily basis. When measured using monthly increments, there has been no discernable change in return volatility. This is likely good news for both traders and investors. Traders are active on a daily basis and can profit from larger movements in the market, thus the slight increase in daily volatility is likely both important to them and viewed positively. Long term investors can take comfort that many of the large daily price declines are at least partially offset by similar price increases and that, when measured over longer periods, volatility has not increased.
AB - This study provides a rigorous examination of historical stock price volatility. We measure changes in the variability of equity returns on a daily and monthly basis and test whether volatility has changed over the period 1926 through 2014. Our results are of importance to practitioners, individual investors, policy makers, and the press and address the widely held perception among market participants and the general public that stock market volatility has increased over time. Our results suggest this belief is accurate, but only when volatility is measured on a daily basis. When measured using monthly increments, there has been no discernable change in return volatility. This is likely good news for both traders and investors. Traders are active on a daily basis and can profit from larger movements in the market, thus the slight increase in daily volatility is likely both important to them and viewed positively. Long term investors can take comfort that many of the large daily price declines are at least partially offset by similar price increases and that, when measured over longer periods, volatility has not increased.
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UR - http://www.scopus.com/inward/citedby.url?scp=84978496676&partnerID=8YFLogxK
U2 - 10.3905/jwm.2016.19.1.071
DO - 10.3905/jwm.2016.19.1.071
M3 - Article
VL - 19
SP - 71
EP - 82
JO - Journal of Wealth Management
JF - Journal of Wealth Management
SN - 1534-7524
IS - 1
ER -