Bridge over ocean
1 May 2011 Financial Analysts Journal Volume 67, Issue 3

Another Clue to Volatility

  1. Martin S. Fridson, CFA

Financial economists treat volatility as a function of investors’ responses to new information. They generally presume that if an asset class is more volatile in one geographical region than in another, it is attributable to a difference in either the local version of the asset class or the economic environment. A case study involving high-yield bond volatility in Europe and the United States suggests that cultural differences may also contribute to disparities in volatility.

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