Stock Volatility in the New Millennium:

How Wacky Is Nasdaq?


Journal of Monetary Economics, 49 (January 2002) 3-26.

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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