The Return of Volatility

According to a recent report by S&P, market volatility is at a 70-year high. I think that’s merely going by 1% daily changes. Other measurements indicate that volatility has indeed risen, but it’s more accurate to say that volatility has returned to normal from an unusually calm period.
The VIX still hasn’t reached the heights of 1998 to 2002. The index has closed above 30 for a few times recently, but it did it fairly regularly a few years ago.
I think the effect of volatility on equity returns is not very strong. The current VIX seems to have an effect on the dispersion of returns, but not the direction.

Posted by Eddy Elfenbein on March 20th, 2008 at 7:42 am

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