The intertemporal behavior of expected market returns is not only driven by predictable market volatility, but also by unexpected volatility changes. Most of the empirical literature ignores the effects of unexpected volatility changes on the intertemporal relation; consequently, the previous empirical results suffer from the omitted variable bias. With the effects of a volatility shock incorporated in the estimation, we find a strong positive intertemporal relation. We also find that the quicker reversion of a negative return is attributable to a negative intertemporal relation. We interpret this negative intertemporal relation under a negative return shock as a reflection of strong optimistic expectations by investors on the future performance of stock prices.