Volatility isn’t the only measure of risk, but it’s a critical one in strategic investing. One need only look at recent history for real-world confirmation. Indeed, volatility has rarely been so extraordinarily high as it has been in 2008. No wonder, then, that real and perceived levels of risk have taken wing.
Volatility analysis has long been popular in the money game and it’s also been a fertile area of study at the macroeconomic level. And yet there’s been little research into how economic and market volatility interact. Helping fill some of the gap is a new academic paper: “Macroeconomic Volatility and Stock Market Volatility, World-Wide,” by professors Francis X. Diebold (University of Pennsylvania and NBER) and Kamil Yilmaz (Koç University, Istanbul).