Volatility Spike, parts III and IV
On Thursday, we noted the increase in volatility via a Financial Post column. Today's chart porn comes via the NYT & Barron's.
First up, the NYT, with this gorgeous info-graphic on volatility -- note the peak in 2002, which marked the bottom of the Bear markets (Oct 2002/March 2003):
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Chart courtesy of NYT
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Second, have a look at Dick Arms column in Barron's. Dick believes the recent volatility surge is a Bullish sign.
I have a lot of respect for Dick, as his methodology is statistically based and empirically driven.
Even if you disagree with him, you can at least respect his methodology, which has zero cheerleading content in it.
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Chart courtesy of Barron's
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Previously:
Buy Volatility (January 14, 2006)
http://bigpicture.typepad.com/comments/2006/01/buy_volatility.html
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Sources:
For Stocks, It’s the Wild West, East ...
FLOYD NORRIS
NYT, March 29, 2008
http://www.nytimes.com/2008/03/29/business/29charts.html
Whiplashed? That's a Bullish Sign
Now Is the Time to Buy, Not Sell
RICHARD W. ARMS
Barron's, MARCH 31, 2008
http://online.barrons.com/article/SB120676003110074029.html
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Saturday, March 29, 2008 | 10:00 AM | Permalink
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Comments
If you follow the suggestion in the chart to buy at 1.5 it would say you should have been buying in 2000 and 2001. For long term investing it seems more prudent to wait until volatility has dropped below 1.0 for an extended period of time -- based on only one period of course. You would miss the true bottom but avoid many false signals. Maybe it works as a trade but then you need a different graph to show volatility vs next X days gains.
Posted by: Geoff | Mar 29, 2008 10:22:06 AM
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