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Your volatility section seems to be a very poor indicator of a future crash in the manner you are using it. Volatility is not a predictor, but instead a descrip
by where_do_i_live 9y ago
Your volatility section seems to be a very poor indicator of a future crash in the manner you are using it. Volatility is not a predictor, but instead a descriptor. An analogy I think is the weather stick - Is this stick wet? Then it is raining. It is a very poor item to use in your context.
Further, sustained periods of low volatility often are sometimes indicators of complacency among investors and indicators of higher chances of bubbles. Sustained periods of low volatility are at times indicative of higher future risk of a market crash, not a low predictor. I think you need to re-evaluate how you use volatility.
- dnadler 9y agoWell, he's using the VIX, so it is technically market implied future volatility. Whether it has predictive power is open to debate, but it is technically a forward-looking indicator.
- pterhx 9y agoMatt Levine wrote an article (with charts!) on VIX[0] back in 2014 that basically says the same thing: VIX is more of a measure of past volatility than an indicator of future volatility. [0] https://www.bloomberg.com/view/articles/2014-06-09/the-vix-is-not-a-great-way-to-measure-complacency https://www.bloomberg.com/view/articles/2014-06-09/the-vix-i...