Volatility, Information and Stock Market Crashes

Johann Scharler; Nikolaos Antonakakis

Volatility, Information and Stock Market Crashes

Johann Scharler
, Nikolaos Antonakakis

Institut für Volkswirtschaftslehre

Publikation: Andere Beiträge › Sonstiger Beitrag

Abstract

In this paper, we examine the evolution of the S&P500 returns volatility around market crashes using a Markov-Switching model. We find that volatility typically switches into the high volatility state well before a crash and remains in the high state for a considerable period of time after the crash. These results do not support the view that crashes are due to the resolution of uncertainty (e.g. Romer, 1993), but are consistent with the model in Frankel (2008) where the adaptive forecasts of volatility by uniformed traders result in a crash.

Originalsprache	Englisch
Seitenumfang	21
Publikationsstatus	Veröffentlicht - Nov. 2009

UN SDGs

Dieser Output leistet einen Beitrag zu folgendem(n) Ziel(en) für nachhaltige Entwicklung

SDG 2 – Kein Hunger
SDG 8 – Anständige Arbeitsbedingungen und wirtschaftliches Wachstum

Wissenschaftszweige

405002 Agrarökonomie
502 Wirtschaftswissenschaften
502001 Arbeitsmarktpolitik
502002 Arbeitsmarkttheorie
502003 Außenhandel
502009 Finanzwirtschaft
502010 Finanzwissenschaft
502012 Industriebetriebslehre
502013 Industrieökonomik
502018 Makroökonomie
502020 Marktforschung
502021 Mikroökonomie
502025 Ökonometrie
502027 Politische Ökonomie
502039 Strukturpolitik
502042 Umweltökonomie
502046 Volkswirtschaftspolitik
502047 Volkswirtschaftstheorie
504014 Gender Studies
506004 Europäische Integration
507016 Regionalökonomie
303010 Gesundheitsökonomie

Andere Dateien und Links

pdf file available

Dieses zitieren

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title = "Volatility, Information and Stock Market Crashes",

abstract = "In this paper, we examine the evolution of the S\&P500 returns volatility around market crashes using a Markov-Switching model. We find that volatility typically switches into the high volatility state well before a crash and remains in the high state for a considerable period of time after the crash. These results do not support the view that crashes are due to the resolution of uncertainty (e.g. Romer, 1993), but are consistent with the model in Frankel (2008) where the adaptive forecasts of volatility by uniformed traders result in a crash.",

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AU - Antonakakis, Nikolaos

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N2 - In this paper, we examine the evolution of the S&P500 returns volatility around market crashes using a Markov-Switching model. We find that volatility typically switches into the high volatility state well before a crash and remains in the high state for a considerable period of time after the crash. These results do not support the view that crashes are due to the resolution of uncertainty (e.g. Romer, 1993), but are consistent with the model in Frankel (2008) where the adaptive forecasts of volatility by uniformed traders result in a crash.

AB - In this paper, we examine the evolution of the S&P500 returns volatility around market crashes using a Markov-Switching model. We find that volatility typically switches into the high volatility state well before a crash and remains in the high state for a considerable period of time after the crash. These results do not support the view that crashes are due to the resolution of uncertainty (e.g. Romer, 1993), but are consistent with the model in Frankel (2008) where the adaptive forecasts of volatility by uniformed traders result in a crash.

UR - http://www.econ.jku.at/papers/2009/wp0918.pdf

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