Open AccessStock Market Volatility and Recent Crises
Author(s) -
Xin Tan,
Sorin A. Tuluca
Publication year - 2021
Publication title -
international journal of accounting and financial reporting
Language(s) - English
Resource type - Journals
ISSN - 2162-3082
DOI - 10.5296/ijafr.v11i3.18933
Subject(s) - volatility (finance) , economics , recession , monetary economics , volatility swap , stock (firearms) , stock market , financial crisis , volatility smile , volatility risk premium , implied volatility , financial economics , macroeconomics , geography , context (archaeology) , archaeology
We study the volatility of the US stock market and its sectors as defined by S&P before and after four recent crises: the Mexican crises, the Asian crises, the Dotcom crises and the Great Recession. We compare the increase in daily volatility with the increase in the implied daily volatility (derived from the monthly volatility) to determine if there was a lasting economic effect of each crisis or the increase in volatility was due to financial transitory components. We find that for each crisis the effect was different even though the increase in volatility was present for most of the crises in the post crises period. The paper helps investors and economic policy makers understand what the response to each crisis should be to stabilize the economy.