The new economy caused a massive disorientation and dislocation of the
market and the price mechanism. Hence the asset bubble. Reverting to an
economy of scarcity is our only hope. If we don't do so deliberately -
the markets will do it for us, mercilessly.
The Roller Coaster Market
On Volatility and Risk
By: Dr. Sam Vaknin
Also published by United Press International (UPI)
Volatility is considered the most accurate measure of risk and, by
extension, of return, its flip side. The higher the volatility, the
higher the risk - and the reward. That volatility increases in the
transition from bull to bear markets seems to support this pet theory.
But how to account for surging volatility in plummeting bourses? At the
depths of the bear phase, volatility and risk increase while returns
evaporate - even taking short-selling into account.
"The Economist" has recently proposed yet another dimension of risk:
"The Chicago Board Options Exchange's VIX index, a measure of traders'
expectations of share price gyrations, in July reached levels not seen
since the 1987 crash, and shot up again (two weeks ago) ... Over the
past five years, volatility spikes have become ever more frequent, from
the Asian crisis in 1997 right up to the World Trade Centre attacks.
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