Stock Market Volatility and Mathematical Expectations

5 Pages Posted: 24 Sep 2019

See all articles by Robert G. James

Robert G. James

California State University, Chico

Date Written: September 14, 2019

Abstract

It is generally believed that excessive stock market volatility reflects non-mathematical market expectations that are driven by “irrational exuberance” or “animal spirits”. As shown in this paper, there is an alternative explanation. If ex-ante and ex-post expectations are calculated in different stochastic processes, uncertainty can cause mathematical market expectations to be more volatile than their fundamentals.

Keywords: volatility, stocks, assets, variance bounds

JEL Classification: C12, G00, G12

Suggested Citation

James, Robert G., Stock Market Volatility and Mathematical Expectations (September 14, 2019). Available at SSRN: https://ssrn.com/abstract=3453911 or http://dx.doi.org/10.2139/ssrn.3453911

Robert G. James (Contact Author)

California State University, Chico ( email )

United States

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