Regularities in volatility and the price of risk following large stock market movements in the US and Japan

We examine the effects of large price changes on volatility and the price o f risk of two broad stock indices, the CRSP value-weighted index of NYSE an d AMEX stocks and the TOPIX of the Tokyo Stock Exchange. Volatility general ly rises after large price changes of either sign but usually revert to pre -jump levels within a week or two. In contrast, the price of risk (except f or the first day after a jump) typically declines following large price inc reases and rises following large price declines with little apparent tenden cy to revert toward pre-jump levels before the arrival of the next jump. (C ) 2000 Elsevier Science Ltd. All rights reserved.