A close examination of Canadian stock market volatility

• Main Author: Michaelides, Mina
• Format: Others
• Published: 1999
• Online Access: http://spectrum.library.concordia.ca/979/1/MQ47810.pdf; Michaelides, Mina <http://spectrum.library.concordia.ca/view/creators/Michaelides=3AMina=3A=3A.html> (1999) A close examination of Canadian stock market volatility. Masters thesis, Concordia University.

This paper examines stock market volatility using daily returns from the Toronto Stock Exchange 300 Price Index, for the time period of January 1st , 1977 through December 31st , 1997. More specifically, the dates on which volatility shifts occurred during this sample period are identified, using the methodology of Haugen, Talmor & Torous (1991). Furthermore, I investigate the extent to which extraordinary macro-economic events are associated with the identified shifts in volatility. Next, I examine how stock prices react immediately following the volatility shifts. In addition, I examine how future realized returns behave due to these same volatility shifts. My findings are as follows. First, I find that the majority of Canadian volatility shifts are associated with macro-economic events. Also, I find that an increase in volatility is more likely to be followed by another increase in volatility than a decrease in volatility and vice versa. Second, I find that an increase (decrease) in volatility causes stock prices to drop (rise). Third, I find that both an increase and a decrease in volatility cause future realized returns to rise. This last finding contradicts the theory and demands further research