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Dr. Paul Price
Dr. Paul Price
Articles (513)  | Author's Website |

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.


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.


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.


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.


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.

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Dr. Paul Price


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