Why was stock market volatility so high during the Great Depression?
Subtitle: evidence from 10 countries during the interwar period
By: Hans-Joachim Voth
Contributors: Massachusetts Institute of Technology. Dept. of Economics
Series: Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 02-09; Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 02-09.
Publisher: Massachusetts Institute of Technology, Dept. of Economics
Published: 2002
Place of publication: Cambridge, MA
Language: eng
Number of pages: 44
Description: The extreme levels of stock price volatility found during the Great Depression have often been attributed to political uncertainty. This paper performs an explicit test of the Merton/Schwert hypothesis that doubts about the survival of the capitalist system were partly responsible. It does so by using a panel data set on political unrest, demonstrations and other indicators of instability in a set of 10 developed countries during the interwar period. Fear of worker militancy and a possible revolution can explain a substantial part of the increase in stock market volatility during the Great Depression. Keywords: Stock price volatility, political uncertainty, worker militancy, Great Depression. JEL Classification: G12, G14, G18, E66, N22, N24, N12, N14.
Notes: "February 2002."; "12.2.2002"--Abstract.

Includes bibliographical references (p. [42]-44).

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