Volatility? This is nothing

Volatility? This is nothing

Monday, March 24, 2008

Here's an idea that should make you feel good about the current bout of volatility that has gripped stock markets: It is actually a return to normal, after a long period of low volatility.
According to Bespoke Investment Group, 44 of the last 90 trading days have seen the S[amp]amp;P 500 move up or down by 1 per cent. And 15 of the last 90 trading days have seen moves of 2 per cent.

Strange days. But Bespoke compared this volatility to other periods and found it is not so unordinary. The number of 1 per cent days hit 64 out of 90 trading days in 2002, 56 out of 90 trading days in 1988, and 54 out of 90 trading days in 1974. These periods also saw far more days of 2 per cent swings as well.

“The reason why so many people are so frantic about volatility is because it was extremely low preceding the current period,” Bespoke said on its blog, noting that it was rare to see a 1 per cent day from about 2004 to 2007. As for 2 per cent days, they simply did not exist during this period.

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