Abstract
Stock market volatility is often attributed to short-term price pressure caused by futures-based trading strategies. Implicitly, volatility should be greater for stocks that comprise indexes and should have increased after the October 1987 crash when liquidity declined. This study compares the intraday price volatility of stocks included in the S&P 500 or Major Market Index with the price volatility of a control sample of non-index stocks on days evidencing extreme price or volume behavior surrounding October 1987. Empirical results indicate that the percentage volatility of index stock prices did not systematically differ from volatility of comparable non-index stocks and did not increase after the crash.
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