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Rev Fin 1990; 3:77-102
© 1990 the Society for Financial Studies

Article

Stock volatility and the crash of '87

GW Schwert
Graduate School of Business Administration, University of Rochester, Rochester, NY 14627, USA

Abstract

This article 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 19 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.


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