The Case Against High Stock-Market Volatility in 2016 (Guest Columnist at Barron’s)
About a month
ago, when Steve
Sears and Barron’s asked if I would
be interested in writing the first The
Striking Price of 2016 and share my perspective on what to expect in terms
of volatility for 2016, I jumped at the chance.
I quickly made a list of more than two dozen reasons why I felt
volatility is likely to rise in 2016 relative to 2015 levels and began to
outline the case for why investors should be cautious about the financial
markets in 2016.
Since then,
every pundit has unveiled their 2016 crystal ball and almost without exception,
the consensus is for a significant rise in volatility in the coming year. While I certainly understand the rationale
behind these calls for an increase in volatility in 2016, I can add little
value to the dialogue by rubber-stamping the consensus opinion. In fact, I am probably better off just
pointing you to last week’s The Striking Price column, where former colleague
Jared Woodard channels some of the more compelling of my two dozen plus higher
volatility ideas in Prepare
for Rising Volatility in 2016.
So, given that I
hate overcrowded consensus trades, strongly believe that volatility is
extremely hard to predict and am intimately familiar with data that shows
market participants have a habit of overestimating future volatility in stocks,
I decided that today’s Barron’s column should be The
Case Against High Stock-Market Volatility in 2016.
Today’s column
draws on a good deal of research and analysis I have present here in the past
and also touches upon themes from some previous Barron’s columns.
Of course, one
should take all of this volatility
prediction stuff with a grain of salt, as back in May 2010 in Barron’s I
was critical of the art and science of predicting volatility in The Perils
of Predicting Volatility.
Related posts:
- VIX Term Structure and VIX Forecasts
- Was the VIX Too Low in 2013? No…
- Violent Disagreement Across VIX Futures
- The Gap Between the VIX and Realized Volatility
- Extremes in the Spread Between the VIX and 20 Day Historical Volatility in the SPX
- VIX Futures: What Were/Are They Thinking?
- Average Annual Normalized VIX Futures Term Structure, 2004-2014
- Revisiting the VIX:VXV Ratio
- The VIX, Lehman Brothers, and Forecasting
- Volatility Aces Bloggers
- What Is Historical Volatility?
- The Case Against High Stock-Market Volatility in 2016 (January 2, 2016)
- Seizing Opportunity From Stock Market Volatility (July 11, 2015)
- How to Ride an Aging Bull (November 29, 2014)
- Investors' Best Options in a ‘No Fear’ Market (July 2, 2014)
- Low Volatility: How to Profit from a Quiet VIX (May 22, 2014)
- Emerging Market Stocks: Have They Hit Bottom? (March 28, 2014)
- How to Spot Risk Early (July 16, 2013)
- How to Insure Your Stock Portfolio (April 18, 2013)
- The Case for Options Trading (January 2, 2013)
- Calm Down and Exploit Others’ Anxieties (November 14, 2012)
- How to Trade Options Around Volatile Events (July 10, 2012)
- Be Greedy While Others Are Fearful (May 3, 2012)
- Ways to Turn Volatility into an Asset Class (January 12, 2011)
- There’s Opportunity in Uncertainty (November 18, 2010)
- Will Market Volatility Return to Crisis Levels? (September 15, 2010)
- The Perils of Predicting Volatility (May 20, 2010)
- Take a Longer View on Volatility (July 2, 2009)
Disclosure(s): none
