Price Volatility, International Market Links, and Their Implications for Regulatory Policies

Abstract

Disastrous events sometimes engender redeeming social benefits. The international crash of equity markets in mid-October 1987 is a case in point, for it has provoked many scientific papers, both theoretical and empirical, on market volatility, international market links, and market structure, papers that may have never been written without the crash as a catalyst. The purpose of the present article is to provide an assessment of some of the most significant empirical studies and to summarize their implications about possible regulatory reform of the equity and futures markets. In addition, I will present some new evidence about volatility and its relation to existing market regulations across countries.