Jitterbugging Markets
As we’ve previously seen many of the strange anomalies that affect investors have a nasty habit of disappearing, just as soon as people recognise that they exist. This wantonly random behaviour gives fuel to the last remaining adherents of the efficient markets hypothesis who can point out that despite the best attempts of behavioural financiers the evidence keeps on vanishing.
Despite the mysterious case of the missing anomalies there’s one that resolutely refuses to go away, squatting in the middle of the markets like a recalcitrant and extremely ugly toad. Rather ungraciously stocks continue to bounce around like a jitterbugger on speed. Regardless of everything else it’s volatility, the last anomaly, that keeps on giving. And then taking away. And then giving back again.
Stuff Happens
High volatility – the nasty habit of share prices to veer about in a sickening rollercoaster fashion rather than trending along near some fundamental value – is a worryingly unpredicted emergent property of markets. Observing the apparently irrational bouncing about of stock valuations one might be tempted to wonder if this is happening less because of the markets adjusting prices due to changes in fundamentals and more, well, because sometimes stuff just happens...
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