Structural changes in volatility and stock market development: Evidence for Spain Juncal Cu~ nado Eizaguirre a , Javier Gomez Biscarri b , Fernando Perez de Gracia Hidalgo c, * a Department of Quantitative Methods, Facultad de Economicas y Empresariales, Universidad de Navarra, 31080 Pamplona, Spain b IESE Business School and Department of Business, Facultad de Economicas y Empresariales, Universidad de Navarra, 31080 Pamplona, Spain c Department of Economics, Universidad de Navarra, Facultad de Economicas y Empresariales, 31080 Pamplona, Spain Received 10 June 2002; accepted 17 June 2003 Available online 9 January 2004 Abstract In this paper we review the factors that lead to changes in stock market volatility and use alternative methodologies of endogenous breakpoint detection in order to analyze whether the volatility of the Spanish stock market has changed significantly over the period 1941–2001. This period corresponds to years of profound development of both the financial and the pro- ductive sides of the economy in this country. The analysis of the Spanish stock market suggests that volatility has behaved in a different manner over the period 1941–2001: After three dec- ades of low volatility, a structural break in volatility is detected in 1972, coinciding with the opening of the Spanish economy. From 1972 to 2001, the years of more intense financial devel- opment, the stock market presents a higher level of volatility and lower persistence. This effect is partly attributable to the increased growth of trading volume brought about by the eco- nomic development process. Ó 2003 Elsevier B.V. All rights reserved. JEL classification: C32; C59; G10 Keywords: Volatility; Trading volume; Stock market development; Multiple structural breaks * Corresponding author. E-mail addresses: jcunado@unav.es (J. Cu~ nado), jgbiscarri@iese.edu (J.G. Biscarri), fgracia@unav.es (F.P.G. Hidalgo). 0378-4266/$ - see front matter Ó 2003 Elsevier B.V. All rights reserved. doi:10.1016/j.jbankfin.2003.06.004 www.elsevier.com/locate/econbase Journal of Banking & Finance 28 (2004) 1745–1773