shrinking volatilty

T

tempula_99

Volatility has been coming down, no doubt about it.

But what next? Is this just the beginning, the return to normality?

I heard some saying that THIS IS NORMAL VOLATILITY, as opposed to one-two years ago, which was exceptionnal and only possible in those very rare crazy markets you see once or twice in a trading lifetime.
And that we should get used to those conditions, and not blame them on some special factors (whether it is investors waiting or whatelse), as lower volatility will now be the norm.

Some opinions?
 
On what do you base your assemption on?

Are you a veteran?

People I had some discussions with were veterans, and they were laughing at me telling me that we should start thinking about NDX intraday ranges very close to those of the S&P... if not equal to them, but certainly not twice or triple everyday anymore.

I would agree with them, having absolutely no experience of market cycles, but still, it seems hard to believe.
 
well, obviously you did not see summer 'volatility'. :)

regarding nasdaq versus S&P, well, the nature of the stocks in the nasdaq index calls for volatility (which is just another way to call emotion driven moves). Some stocks are less volatile than other regardless of volume. an internet stock is still (despite the bubble burst) more volatile than a utility stock. When in an index you have more of these volatile stocks, the index is more volatile.
Of course the bubble days are gone and that was extreme in trends and volatility. but saying than both index will have the same volatility is not realistic imho.
 
As the chart shows, volatility in the NDX as a whole is far below boom/crash levels, but remains fairly high in historical terms. The same is largely true for individual equities.

I suspect that, until and unless some new structural change occurs, volatility levels, with allowance for seasonal variation and the occasional BIG EVENT, may remain somewhat above prior norms, among other things reflecting advances in information technology that enable markets to function at higher tempos and with broader participation than in previous decades.

I suppose at some point the effect could be inverted (markets moving so fast that they appear, in relative terms, to be standing still), but I think we're still a long way from there.
 
I think everybody is overlooking the obvious about the volatility. Big money on wallstreet has been trying to take back their turf by taking out the little guy. First supersoes and decimals then the new stiffer margin requirements to eliminate tons of traders that add liquidity and volatility and next supermontage. When they are finished no volatility will remain.:mad:
 
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