Chris Cole of Artemis Capital Management has created an incredibly cool film called “Volatility at World’s End: Two Decades of Movement in Markets” showing a depiction of real stock market volatility using trading data from 1990 to 2011. It accompanied his speech at the 2012 Global Derivatives and Risk Management Conference in Barcelona, Spain.
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Here’s Chris’s introduction:
“Nobody will deny there is roughness everywhere….” Benoit Mandelbrot
The movement of stock prices has been an obsession for generations of speculators and traders. On a higher level mathematicians believe that modern markets are an extension of the same fractal beauty found in nature. Visualized these stock markets may take the shape of a turbulent ocean with waves made of human hope, greed, and fear. Merging the world of high-finance and high-art Artemis Capital Management LLC is proud to present a creative visualization of stock market volatility over the last two decades. The video was first shown in conjunction with Christopher Cole’s speech at the 2012 Global Derivatives and Risk Management Conference in Barcelona, Spain.
For the value investor a cursory understanding of volatility can be an important component of market timing. Many value investors are aware of the VIX index that tracks 30 day volatility of the S&P 500 index. The film from Artemis goes one step further animating a series of theoretical VIX indices at different maturity levels extending from 21 days all the way to 1 year. The end effect is a vibrant volatility “wave” that shows when investors are most fearful or complacent in vivid motion. Artemis has produced an interesting piece of art and a multi-dimensional view into the sentiment of investors for over 20 years.When the volatility wave is violent, steep, or exploding investors are afraid and willing to pay more to protect their portfolio. The height of the wave represents the changing price of portfolio insurance far into the future.
And, without further ado, the film:
Head on over to his website for the research note that accompanies the film and other interesting research.