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Volatility in World Equity Markets

Author

Listed:
  • Steven J. Cochran

    (Department of Finance, College of Commerce and Finance, 800 Lancaster Avenue, Villanova, PA 19085, USA)

  • Jean L. Heck

    (Department of Finance, College of Commerce and Finance, 800 Lancaster Avenue, Villanova, PA 19085, USA)

  • David R. Shaffer

    (Department of Finance, College of Commerce and Finance, 800 Lancaster Avenue, Villanova, PA 19085, USA)

Abstract

Past research suggests that US stock market volatility was greater during the 1930s than in any other 10-year time period and the post-WWII era is a period of relative stability, despite slightly higher volatility levels during the 1970s and 1980s. More recent evidence suggests that volatility levels from 1998 to 2001 have more in common with 1930s levels than with any other time period. We extend this body of research to include the volatility experiences of seven equity markets in the US, Europe, and Asia. For each market, we compare the average monthly volatility of each five-year period, beginning with January 1923, with that for the most recent period in the study, January 1998 to August 2001. We find that when there are statistical differences between current and past levels of volatility, recent volatility is usually significantly greater than past volatility. In only a small number of cases do we find current volatility to be less than past volatility. This suggests that the 1998–2001 period was unusually volatile for most markets examined. We also find that volatility behavior tends to be country-specific and cannot be generalized on an aggregate basis.

Suggested Citation

  • Steven J. Cochran & Jean L. Heck & David R. Shaffer, 2003. "Volatility in World Equity Markets," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 6(03), pages 273-290.
    • Handle: RePEc:wsi:rpbfmp:v:06:y:2003:i:03:n:s0219091503001092
    DOI: 10.1142/S0219091503001092
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    References listed on IDEAS

    as
    1. Sebastian Edwards, 1998. "Interest Rate Volatility, Capital Controls, and Contagion," NBER Working Papers 6756, National Bureau of Economic Research, Inc.
    2. Kristin Forbes, 2000. "The Asian Flu and Russian Virus: Firm-level Evidence on How Crises are Transmitted Internationally," NBER Working Papers 7807, National Bureau of Economic Research, Inc.
    3. Calvo, Sara & Reinhart, Carmen, 1996. "Capital flows to Latin America : Is there evidence of contagion effects?," Policy Research Working Paper Series 1619, The World Bank.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Market volatility; world equity markets;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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