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Volatility: Blessing or Curse?

May 14, 2013 | About:
May you live in interesting times!

The phrase above is sometimes called an old Chinese proverb. It has also been labeled as a curse. Wilshire Associates, a global advisory organization and owner of the Wilshire 5000 brand name, studied market volatility to see if we have truly been “living in interesting times” lately.

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The answer? The most recent decade exhibited higher than normal fluctuations when compared with all data going back to 1980, measured by calendar year total return.

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The movements were less extraordinary when tallied on a month-to month basis. The number of individual 30-day periods showing plus or minus 0% to 5% was a bit high. Really large monthly swings of greater than 5% in either direction came in slightly lower than the full 34 years studied.

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It was the daily news where recent action had been well-above historically neutral (1.0 on the chart below). 2000-2002 and 2007-2011 saw some pretty wild up and down days. We hadn't experienced daily swings that large since 1987's pre- and post-crash era.

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Volatility in 2013 is running below normal so far. Anyone who has been long equities is probably not complaining about the steady progress of the indices to new all-time highs. If that’s what it means to be uninteresting, I’m content to skip the excitement while taking the gains.

About the author:

Dr. Paul Price
http://www.RealMoneyPro.com
http://www.TalkMarkets.com

Visit Dr. Paul Price's Website


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