Wednesday, January 2, 2008

McMillan on Interest Rate Moves Preceding Volatility

Interesting fodder for further contemplation, from options guru Larry McMillan in Barron's: Volatility Likely to Remain High in 2008.

The article is much more interesting that the title might suggest and discusses a 'theory' that short-term interest rates precede volatility by 2 1/2 years. While this sounds like a stretch to me, if you believe the theory, then the VIX should be topping in early 2009 -- which just happens to be about the time suggested by some of my VIX macro cycle work. Certainly worth a click through for the curious...

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