Stock Volatility in the New Millennium:
How Wacky Is Nasdaq?
Journal of Monetary Economics, 49 (January 2002)
G. William Schwert
University of Rochester, Rochester, NY 14627
and National Bureau of Economic Research
prepared for the April 2001 Carnegie-Rochester Conference on Public Policy
The recent volatility of stock prices has caused many people to conclude that
investors have become irrational in valuing at least some stocks. This paper investigates
the behavior of the volatility of stocks on the Nasdaq, which tend to be smaller
companies with more growth options, in relation to the more seasoned issues reflected
in the Standard & Poor’s 500 portfolio. It also analyzes the relation of the unusual
Nasdaq volatility to the hot IPO market in 1998 and 1999. The factor that seems
to explain unusual volatility best is technology, not firm size or the immaturity
of the firm.
Key words: Volatility, Nasdaq, IPO
JEL Classifications: G14, G12, G18
Cited 50 times in the SSCI and SCOPUS through 2014
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