Sign In
SHARE
Why We're Ignoring Big Stock-Market Moves
Megan Barnett notes today that extraordinary volatility is being met with shrugs. It's true that it's something to which we're getting accustomed; I think there are two main reasons.
The first is that in normal markets, a huge swing tends to actually mean something. People pay attention to 500-point moves in the Dow mainly because of what they bespeak, and right now 500-point moves in the Dow can mean anything, or nothing.
The second reason is that volatility numbers are exaggerated as a result of the distance that stock markets have fallen. A 500-point move in the Dow is a 6% swing, these days; back when the Dow was at 14,000, it was only a 3.5% swing. If the absolute moves remain constant, and prices fall, then volatility rises. A lot of the recent spike in the VIX, I think, is largely a function of lower prices: if it was somehow measured in dollars rather than percent, it wouldn't have risen so much.
Put those two together, and exercises along the lines of wondering whether we've ever before had two back-to-back 6% up days in the Dow become largely academic. I think at this point we're all painfully aware that volatility is at unprecedented levels. If you want to find a few anecdotal datapoints to illustrate that, fine. But big stock-market moves aren't really news any more, or particularly interesting.
Loading...
Thank you for registering as a Portfolio.com Insider. Your comment has been added.
Create Your Public Profile
- The Times' Rorshach Geithner Story
- Apr 27 2009 9:26AM EDT
- Sinking Animal Spirits
- Apr 27 2009 8:45AM EDT
- Counter-cyclical Urban Policy
- Apr 26 2009 10:00AM EDT
- Be Your Own Counterfeiter
- Apr 26 2009 9:36AM EDT
- Being Tim Geithner
- Apr 25 2009 12:37PM EDT
- Notes From a Press Conference Naif
- Apr 25 2009 9:41AM EDT
- What Good is the News?
- Apr 25 2009 8:32AM EDT
- Stressful Enough
- Apr 24 2009 2:29PM EDT
- Not Regretting the Pound
- Apr 24 2009 1:09PM EDT
- Introducing the New Ford Squeeze
- Apr 24 2009 9:47AM EDT
- Non-Economic Questions of the Day
- Apr 24 2009 9:12AM EDT
- The Stress Test Blind Alley
- Apr 24 2009 8:36AM EDT
- Happy Hour
- Apr 23 2009 9:40PM EDT
- Recovery Without Rebalancing
- Apr 23 2009 6:13PM EDT
- The Shape of Your Recession
- Apr 23 2009 5:11PM EDT
Archive
Categories
Links
- Email Ryan Avent
- Econospeak
- Financial Crookery
- The Epicurean Dealmaker
- Naked Capitalism
- Alphaville
- Marginal Revolution
- The Panelist
- FP Passport
- Overcoming Bias
- Andrew Leonard
- Barry Ritholtz
- Brad Setser
- Carbon Tax Center
- Calculated Risk
- Greg Mankiw
- Free Exchange
- Dean Baker
- Alexander Campbell
- Kash Mansori
- The Bayesian Heresy
- A Fistful of Euros
- John Quiggin
- Michael Mandel
- Lance Knobel
- Mark Thoma
- Dan Gross
- Curbed
- Streetsblog
- Chris Anderson
- Deal Journal
- MarketBeat
- DealBook
- DealBreaker
- Carl Bialik
- Michelle Leder
- Brad DeLong
- Ultimi Barbarorum
