Market = Market volatility

CFAI V6, practice problem for Reading 70, Q2, what is the difference between “the market may fall” and “market volatility may fall”?

I don’t have the books, but if the DJIA falls 10 points tomorrow, it fell. If it stayed this way for the whole week, the volatility was low. If the market jumped 300 points one day and fell 300 points the next day, the market rose and fell but the volatility was high. Volatility and price levels are different concepts.

Agree. People make too much out of the supposed notion that volatility has to rise when the market falls. There is some correlation but it is not a perfectly negative relationship by any means.

vol = sigma = st dev of the market’s movements over a given day. typically, when this is more headline risk, volatility is high, like the market period we are in now boom!

Of course, a nice way to get this down completely is to download historical VIX data (which is the volatility expected by the options markets) and S&P prices and graph them.

market may fall : could be of any reasons ,e.g liqudity … a major weighted stock did stock split recently or lost a key member of team market volitility down: means markets are more stable, could be from stable interest rate , any macro economic condition ,or latest posative employment data issued. if you think they are corelated , but to what extend that depends…

"a major weighted stock did stock split recently " doesn’t directly affect any index “latest posative employment data issued” doesn’t necessarily keep market volatility down (btw - it’s “positive” and “volatility”). Market volatility is usually up around key employment report announcements but might fall after the announcement comes out.

JoeyDVivre Wrote: ------------------------------------------------------- > "a major weighted stock did stock split recently " > doesn’t directly affect any index > > “latest posative employment data issued” doesn’t > necessarily keep market volatility down (btw - > it’s “positive” and “volatility”). Market > volatility is usually up around key employment > report announcements but might fall after the > announcement comes out. Guess that’s why he’s level1_dec and not level1_june

joey, a major weighted stock did stock split recently " doesn’t directly affect any index i thought it would affect price-weighted index(downward bias) also positive employment data would keep markets less volatile(i think),i.e ,market voaltility down. also your statement "Market volatility is usually up around key employment report announcements but might fall after the announcement comes out. " i think semi strong hypothesis is supported by event studies so volatility should be up during and after announcement.

stock splits don’t move an index. The index divisor is adjusted. “also positive employment data would keep markets less volatile(i think),i.e ,market voaltility down.” This is just nonsense I’m afraid. Keep studying! the semi strong form of the efficient market hypothesis says nothing about volatility.