Newsgroup: it.economia.borsa
Titolo: Volatilità azionaria e credit spread

L'autore indaga sulle fonti del calo della volatilità e dei credit spread,
tentando di prevdere le possibili conseguenze di un ritorno a più alti
livelli.
Estremamente interessante.
Inefficient Market: Cheap insurance
Long ago, Lord Keynes observed that stocks move around more than could be
justified by changes in fundamentals. High levels of volatility usually
indicate that a crowd mentality has taken hold of the market. Some
commentators have greeted the recent decline of equity volatility as a sign
that the stock market is becoming more efficient. Others, however, argue
that current low expectations of future stock market volatility reflect the
dramatic mispricing of risk throughout the financial markets. They believe
that volatility is set to rise sharply and that investors should seek
protection before it is too late. Various reasons have been advanced for the
recent decline in volatility. While the notion of the 'new paradigm', so
popular during the late 1990s, expired during the subsequent bear market, it
has been replaced by less felicitous references to the 'great moderation'
and a 'new regime' of muted volatility. The argument, however, is unchanged:
improved monetary policy and advances in the risk management have reduced
macro-economic and financial volatility. Lower volatility means less risk.
Therefore it is reasonable that the implied volatility of equities, as
measured by the VIX index at the Chicago Board Options Exchange, together
with risk premiums across a whole range of asset classes - from credit
default swaps to emerging market debt - should decline. There are other
explanations for the recent decline in equity volatility. Five years ago,
the stock market was dominated by technology and telecoms stocks which were
extremely highly valued and often very highly leveraged. An inevitable
consequence of Cisco becoming the world's most valuable company, as it did
briefly in early 2000, was rising stock market volatility. In recent years,
however, the weighting of the volatile technology stocks in the S&P 500 has
declined while that of less volatile 'Old Economy' stocks has increased.
Many companies have used the period of low interest rates to refinance and
despite recent strong profits growth the corporate sector as a whole has
remained cautious of taking on more debt (issuance of investment grade bonds
is down by around a third this year). Since stocks are really just options
on the residual value of a company after liabilities, lower corporate
leverage implies lower stock market volatility. Finally, as Larry Chen of
UBS points out, the decline in anticipated equity volatility is in line with
lower spreads on other traditionally volatile assets, such as junk bonds.
The VIX index uses the prices of options on the companies trading in the S&P
500 index to measure the implied volatility of the market. Throughout this
year the so-called 'fear gauge' has been trading in a narrow range around
15. This is some way below its long-run average of 20 and less than half the
average level of the VIX during the bear market of 2002. Although the VIX is
mean-reverting over the long term, its recent low level doesn't necessarily
indicate that investors are overconfident. Between 1992 and 1994 the VIX
traded at much lower average levels. As we now know, the lack of investor
fear in those years did not augur a stock market collapse. Rather, it was
followed by the greatest bull market in history. Furthermore, even after the
stock market took off in 1995, the VIX remained low. The bulls expect
history to repeat itself. The bears, on the other hand, claim that the VIX
has been sending out a false signal about the future prospects of the stock
market. Their argument goes something like this. As interest rates have
fallen in recent years, investors have become desperate to boost their
income. Investment banks have seen strong demand for structured products
whose yields are 'enhanced' by selling options on the stock market. In
addition, the market for credit derivatives has been growing strongly. The
banks hedge their exposure to these instruments by selling options. As a
result, the market has been awash with sellers of volatility. While supply
has increased, however, demand has evaporated. Over the past year or so,
investors who sought to protect themselves against an anticipated rise in
volatility have ended up losing money. The recent decline in equity
volatility, say the bears, is symptomatic of the mispricing of risk across
the spectrum of traditionally volatile asset classes. In the era of low
interest rates, investors have indiscriminately grabbed for yield. As a
result, spreads on emerging market debt, junk bonds and credit default swaps
have been trading around historic lows for most of 2004. The current market
prices of these risky investments do not reflect the probability of future
defaults. Finally, the bears argue that the era of economic stability is
built on sand, or rather on a credit boom and house price inflation. When
the credit bubble bursts, the profits of the financial sector (which
accounts for around a quarter of current stock market capitalisation) will
implode and equity volatility will soar. Contrary to what many believe, the
art of investment is not about achieving the maximum returns in any single
year. It is about controlling risk. Currently, investors can cheaply insure
themselves against the possibility of an economic downturn or a financial
accident. This year, of course, such protection against financial calamity
has not proved necessary. But just because a recent policy has expired
without a claim is no reason to forego insurance for the year ahead.
 
 
Author : Edward Chancellor
 
 
 
--------------------------------
Inviato via 
http://arianna.libero.it/usenet/

 ha scritto nel messaggio
news:139Z149Z1Z194Y1...@usenet.libero.it...
Grazie Chiro, uno dei pochissimi che posta cose utili.