​Sigma Square’s Wintner: Vol Of Vol Will Be Key

The past year has been an interesting one regarding the volatility of asset classes. Across currencies, equities and commodities, volatility behaved in a rare pattern. It was not just the pace of increasing volatility that stunned investors, most prominently in crude oil and commodity related currencies – but also the speed of the subsequent decline in volatility, especially in equities. While large moves in equity markets have historically more frequently occurred on the downside, 2014 gave stock market investors an idea of how upside volatility can look alike. The “sell-off” in October 2014 was immediately followed by the sharpest and strongest short term recovery in history (admittedly thinking of the last 20 years only), indicating investor fear on the one side but also “hunger for returns” on the other side.