Volatility, Information and Stock Market Crashes

Nikolaos Antonakakis, Johann Scharler

Publikation: Wissenschaftliche FachzeitschriftOriginalbeitrag in FachzeitschriftBegutachtung

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.
OriginalspracheEnglisch
Seiten (von - bis)49 - 67
FachzeitschriftJournal of Advanced Studies in Finance
Jahrgang3
Ausgabenummer5
PublikationsstatusVeröffentlicht - 1 Okt. 2012

Österreichische Systematik der Wissenschaftszweige (ÖFOS)

  • 502010 Finanzwissenschaft

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