G. William Schwert

University of Rochester, Rochester, NY 14627
and National Bureau of Economic Research

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Review of Financial Studies, 3 (1990) 77-102

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This paper analyzes the behavior of stock return volatility using daily data from 1885 through 1988. The October 1987 stock market crash was unusual in many ways. October 19th was the largest percentage change in market value in over 29,000 days. Stock volatility jumped dramatically during and after the crash. Nevertheless, it returned to lower, more normal levels more quickly than past experience predicted. I use data on implied volatilities from call option prices and estimates of volatility from futures contracts on stock indexes to confirm this result.

Key words: Volatility, Stock Market, Crash, Option, Heteroskedasticity

JEL Classifications: G12, G14

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Cited 307 times in the SSCI and SCOPUS through 2020

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A full-text version of this paper is available in Acrobat's portable data format (.pdf).

Click here to download the reprint of the crash of 87 paper.

Click here to download a lower quality (and smaller file size) reprint of the crash of 87 paper.

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© Copyright 1990, Society for Financial Studies

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