ebook essays pieces of the puzzle
Tuesday, March 20th, 2012
years of volatility

Given the recent collapse in volatility for the broad stock averages, it seemed like a good time to look at the historical record.  The chart shows thirty-day realized volatility, measured weekly, since 1993.  The simple average of those observations is represented by the light horizontal line in each panel.

The scales used are the same, so that it’s easy to see the relative action of the S&P 500, oil (this is the nearby futures for West Texas Intermediate crude), and gold.

Oil wins hands down if you’re looking for the most volatile of the three, with a much higher average level and many more big spikes, including the one that’s literally off the chart — it peaked at 118%.

I wonder what will cause these to spike the next time around.  (Chart:  Bloomberg terminal.)

decision building blocks

Big money demands big decisions, primarily on a few key issues, since much of the detailed investment work is done by others.  The latest issue of The Prudent Fiduciary Digest addresses three areas of concern:  the best practices regarding governance, seizing the agenda from investment managers during review meetings, and identifying and addressing assumptions (including the big one).