Why was Stock Market Volatility So High During the Great Depression?

Why was Stock Market Volatility So High During the Great Depression?

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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.The extreme levels of stock price volatility found during the Great Depression have often been attributed to political uncertainty.


Title:Why was Stock Market Volatility So High During the Great Depression?
Author: Hans-Joachim Voth
Publisher: - 2002
ISBN-13:

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