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Volatility

Volatility is a measure of how the price of an asset – be it a stock, an option or a fund - changes. Volatility tracks how much the price moves and also how fast it changes. Beta is a commonly used statistical measure that represents volatility, and the higher beta is, the greater the risk. There’s usually a reference index such as the S&P 500 and if a stock perfectly tracks the index, it is said to have a beta of 1.0. If it changes more than the index, be it on the up or downside, it is a high beta stock. For example, a stock with a beta of 1.5 means that historically, it has moved 150% for every 100% move in the benchmark index. Mutual funds nowadays provide free volatility measures so you can get a good feel for how stable the fund is year in and year out.

How Much More Volatility Can Retail Investors Tolerate?

Retail investors in the U.S. have been exiting in droves in light of the extreme market volatility. A Bloomberg article hits the nail on the head when questioning the psyche of the average U.S. fund investor. Mutual fund flows indicate that the damage to psyches is real and lasting: 33 straight weeks of fund withdrawals after May 10 2010 totaled $98 billion. Fund redemptions total $74 billion thus far in 2011 $23.5 billion has flown from U.S. equity funds in the week ending August 10, 2011. A...
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Volatility
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Glossary: 
Volatility
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Retirement
Market Volatility

There is no Free Lunch for Retirees when it Comes to Investment Risk

Retirees have every reason to be an extremely risk averse bunch.  After all, most of them have an immediate or near-term need to draw income from their assets.  This need for income should result in zero tolerance for investment risk or reduction in value of the assets that are intended to produce the retirement income...

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Asset
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Retiree
Retirement
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Moshe Milevsky
Economics
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Asset
Capital
Interest Rates
Income
Asset Allocation
Volatility
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Retiree
Retirement
Retirement Income
Market Volatility
Moshe Milevsky
Economics

For Retail Investors Who Want to Sleep at Night

It is the afternoon (markets are closed) of August 9 2011, and millions of retail investors around the world must be asking themselves whether they can continue to stomach the gut-wrenching capital market volatility. 

The issue and questions about staying-power take on another dimension for those who are close to retirement or in retirement.  Retirement spending plans and the viability of retirement plans in general are brought into question. 

For those who are seeking alternatives to the madness of daily...

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Capital Market
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Interview
Economics

Retirement Planning Options

What options are available to a soon-to-be retired household that is financially constrained?  What levers can be pulled if desired retirement spending is not realistic in light of retirement savings?

The financial profile we developed in related articles offers a case study of a financially constrained household.
What options are available to a soon-to-be retired household that is financially constrained?  What levers can be pulled if desired retirement spending is not realistic in light...
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VIX Futures Signal Rising Volatility

The Chicago Board Options Exchange (CBOE) Volatility Index (" VIX ") is trading at levels not seen since 2007. The VIX is 25 percent below its long-term average of 20. As discussed in a recent Wall Street Journal article, part of the recent dip is a result of a procedural quirk triggered by some investors selling contracts before the long weekend that just passed. Although current prices reflect little concern about volatility, VIX futures contracts suggest that stock market volatility could...
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