The measurement of share price volatility in the Athens stock exchange

Abstract

Within the framework of an efficient stock market, every piece of new information adjusts investors’ expectations for the long term prospects of the listed securities. As a result, prices are fluctuating accordingly, until they reach new equilibrium points. However, sometimes share price volatility is severe, due to certain factors which strongly affect the price formation mechanism.
Measuring price volatility and identifying the factors primarily responsible for it, is the subject of the present study, which utilizes data from the Athens Stock Exchange for the period 1986-2006. Applying standard methodologies, it is depicted that volatility is substantially affected by the political party in power (which in turn determines political risk) and institutional changes. Also,
contrary to common belief, bear or bull market conditions are only marginally responsible for the increase of price volatility.

JEL Classifications: G15, C32