The Return of Volatility, Part III

One of the interesting aspects of market volatility is that it’s not linear. By that, I mean that when the market becomes more volatile, the volatile stocks get REALLY volatile. When volatility fades, volatile stocks then only become slightly more volatile than the market.
Here’s a chart of the trailing 50-day average swing (standard deviation) of the S&P 500 (yellow line) and the Nasdaq (black line):

Notice how the Nasdaq used to be two and three times more volatile than the S&P 500. But today, the two are practically identical.

Posted by Eddy Elfenbein on June 1st, 2006 at 3:26 pm

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