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S&P 500 Cash Stock Price Volatilities

Lawrence Harris
The Journal of Finance
Vol. 44, No. 5 (Dec., 1989), pp. 1155-1175
Published by: Wiley for the American Finance Association
DOI: 10.2307/2328637
Stable URL: http://www.jstor.org/stable/2328637
Page Count: 21
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S&P; 500 Cash Stock Price Volatilities
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Abstract

S&P 500 stock return volatilities are compared to the volatilities of a matched set of stocks, after controlling for cross-sectional differences in firm attributes known to affect volatility. No significant difference in volatility is observed between 1975 and 1983--before the start of trade in index futures and index options. Since then, S&P 500 stocks have been relatively more volatile. The difference is statistically, but not economically, significant. The relative increase occurs primarily in daily returns and only to a lesser extent in longer interval returns. Other factors besides the start of derivative trade could be responsible for the small increase in volatility.

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