Volatility & The Information Age+Globalization

Discussion in 'Economics' started by fader, Jan 5, 2006.

  1. fader


    perhaps the title of the thread is a bit too pompous...

    clearly, the "Information Age" contributes to efficiency, i.e. information dissemination, electronic transactions etc etc.

    "globalization" is a parallel phenomenon contributing to efficiency.

    the effects are clear - there is a huge influx of liquidity into the financial markets.

    i have spent considerable effort studying a few decades of market behavior in the major markets.. - i understand the higher/lower volatility cycles experienced in the past

    my guess is that the "average" level of volatility will tend to "trend" down...

    i am not saying that there will not be high volatility; not at all, no matter how much efficiency and liquidity there is, there will always be events creating volatility etc etc.

    however, i am guessing that, due to the "new age" effects, the (1) "high" volatility in the present / future will not be as "high" as in the past and (2) "low" or average volatility will be "lower" than in the past.

    perhaps (1) above is a bit more questionable, due to extreme behavior factors... but (2) seems more likely

    does anyone have any thoughts on this? is there any reading material or discussion of this issue?
  2. IMHO, stocks and the stock market are still moved by emotion. Advances in information technology only speeds up the process, and if anything, contributes to volatility. The reason we are experiencing such a low period of volatility is very simply a lack of strong emotional commitment on either side of the market.
  3. BTM


    pic, nice one
  4. fader


    i don't disagree with the "major" emotions and exaggerations.. - when a major event happens (or commitment as you say), the volatility may become unpredictable.. - i am saying "on average" (i.e. "most of the time") - for example, take some sort of a countertrend strategy, let's say japan or europe is making a big move overnight - some years ago, the banks had to and had people in japan and in europe executing but it was not feasible for many other participants (in the U.S.) to get up in the middle of the night and trade - nowadays the execution is a lot more accessible, electronically/automated, foreign markets, electronic U.S. contracts etc etc. - i.e. there is a lot more liquidity standing by to react to events; events meaning not (1) when the house of cards starts falling but (2) other significant events which do not result in (1) - clearly this has to dampen the overall volatility.
  5. fader,
    with respect to the stock market(s), my opinion is that there really is no underlying reason to buy anything nor sell anything.
    So the marketmakers, specialists and speculators do most of the BS volume. But nobody else is interested.
    This has been the situation pretty much for the last 2 years.
    Hopefully, somebody will screw up somehow/somewhere where/when it ain't expected and maybe, just maybe, the volatility ball will get rolling again.
  6. mizer


    Risktaker.......So your saying there really is no real buying or selling in the stock market?

  7. I agree 100%

    Its not about trying to take the market up.. or buying..

    but more "they" trying to prevent any selling....

    Thus the net affect is market powers sideways
  8. fader


    by the way, i am not sure about this - i am guessing that, it's not like while we are sitting here in the middle of a big range in the stock indices, and either side of the market is going to decide to commit in here - i think that in the end events are going to drive the market to an extreme and only then one or both sides will "decide" to or be "forced" to commit.
  9. The BIG money guys know this market is fully valued if not *over*valued and they're not biting when the market powers higher. Yet, since interest rates are so low, there's nowhere else for money to go and so it also refuses to follow through on the downside. At some point, rates will be attractive again to entice people to remove money from stocks. Whether they would or not is not so important as much as the possibility of that occurring would then introduce more volatility since everyone will take that into consideration.

    As for *real* buying nowadays? Yeah it occurs, but the buyers only buy on reactions with a "what's the rush?" attitude.

    *Real* buying/selling is visible by seeing many decent range expansion days where big money overwhelms the stupid games specialists and market makers play to take your money.

    Look at the Dow's range in the last 6 weeks...2%! Is that *real* buying/selling? Not in my book. That's just people playing tricks on each other.

  10. TGregg


    But eventually the boomers will have to cycle out to secure investments, and since everybody knows that's coming then folks'll bail before hand. But the really smart money would fake a retirement bailout before a run up that sucks everybody back in before tanking. Unless that's what the smart money wants us to think, in which case we'll have ups and downs until a nice tank.

    I do believe that's enough contrarianism for tonight.
    #10     Jan 5, 2006