Dispersion In A Portfolio Context

Measures of market volatility, particularly forward-looking measures such as the VIX, have become ubiquitous in describing the prevalent risk regime. But despite its comprehensive usefulness and concise expression, the VIX is a macro indicator—speaking to systemic effects that, by definition, exclude precisely those risks diversifiable through total market investing. Idiosyncratic stock effects and other granular phenomena (such as the formation of bubbles within particular market segments) can pass under the radar of macro indicators, yet their aggregation may nonetheless be of great significance.