How to Lower the Volatility in the Stock Market? More Reading Less Trading

6 Pages Posted: 18 Nov 2019 Last revised: 6 Jan 2020

See all articles by Yosef Bonaparte

Yosef Bonaparte

University of Colorado at Denver - Department of Finance

Date Written: November 7, 2019

Abstract

This paper presents steps to lower the overall volatility in the stock market; as a large portion is unrewarded and unjustified and driven by overreaction accompanies with herd behavior. We first map the key factors that cause volatility, such as: earnings surprise, CEO turnovers, merge and acquisitions, etc. and then present our suggestions; where the key elements are: (i) fewer day/hours of trading, which in turn increases time to processing information; and (ii) semi-annual earnings reports instead of quarterly; smoothing the surprises. Following these suggestions, the volatility decreases by at least 15.5% per day. Collectively, we suggest to trade less and read more.

Keywords: stock market volatility, underreaction, overreaction, herd behavior; Warren Buffet

JEL Classification: G12, G10

Suggested Citation

Bonaparte, Yosef, How to Lower the Volatility in the Stock Market? More Reading Less Trading (November 7, 2019). Available at SSRN: https://ssrn.com/abstract=3483187 or http://dx.doi.org/10.2139/ssrn.3483187

Yosef Bonaparte (Contact Author)

University of Colorado at Denver - Department of Finance ( email )

United States

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