An analysis of stock market volatility

Andrew Adams, Seth Armitage, Adrian FitzGerald

    Research output: Contribution to journalArticlepeer-review

    2 Citations (Scopus)


    This paper provides a user-friendly approach to explain how variation in fundamental price-determining variables ‘translates into’ variation in the fundamental value of equities, based on the standard dividend-growth model. The analysis is illustrated with UK data using estimates of real interest rate forecasts and real dividend growth rate forecasts in the past. An important application of this approach is that stock market volatility can be analysed in terms of its component parts. Actual market volatility does not appear to be excessive when compared with the notional volatility implied by changes over time in our estimates of forecast real interest rates and forecast real dividend growth rates.
    Original languageEnglish
    Pages (from-to)153-170
    JournalAnnals of Actuarial Science
    Issue number01
    Publication statusPublished - Mar 2012


    • Excess Volatility
    • Rational Valuation
    • Dividend-growth Model
    • Equity Risk Premium


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