Asymmetric Volatility Phenomenon - AVP

  

Categories: Metrics, Stocks, Econ, Investing

This very real "phenomenon" refers to how much more volatile (hard to predict, less stable, basically wild and crazy) markets are when declining, as opposed to rising. One explanation is behavioral psychology...when the economy starts to struggle, people start selling off stock abruptly and with more panic than numerical logic, fearing it might drop even lower than it already has.

Basically, when stock prices start to vary, and people start to panic, it spreads like panic in a crowded theatre after someone hollers "Fire!"

Meanwhile, when stocks are going up, people can get unreasonable about it (that's how bubbles form), but they do so in a more orderly way. There's less chance that people will start tripping over themselves to get into a place than to get out of it.

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Finance: What is Asymmetric Information?25 Views

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Finance allah shmoop what is asymmetric information Well asymmetry happens

00:08

when two sides of something aren't equal think giant red

00:13

wood and we'd regular crab and fiddler crab recumbent bike

00:18

and a eunice cycle well in the financial world asymmetric

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information exists when one side of a transaction think inside

00:27

trader scumbag who collects briefcases full of cash from somalia

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in overlords versus a normal joe six pack investor trying

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to fairly participate in the stock market So he has

00:39

a pension to retire on while bouncing great grandchildren on

00:43

his newly installed robotic knees Well discount needs don't go

00:48

there Your summer college job is cleaning the house of

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the ceo of whatever dot com currently trading at eighteen

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bucks a share as you empty her garbage one night

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pushing away adult diapers in the process Yes she has

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a lot of pressure on the job on this conference

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calls and saying ooh a lot I push that away

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You realize that microsoft is buying her company for thirty

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dollars a share You then by a ton of stock

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at eighteen bucks you had a symmetric information because you

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dug through the trash and you found the memo from

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whoever the ceo is of microsoft these days to her

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and that was bad You didn't have to act on

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that information like you could have just done a whole

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lot of nothing and not repeated it to anyone and

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left the stock at eighteen dollars until it was all

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in the news at thirty and moved on and still

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have your job cleaning her trash Having inside information isn't

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illegal but doing something to benefit yourself tor You know

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your loved ones is illegal So if you trade based

01:48

on inside asymmetric information well then you just committed a

01:52

felony It's called insider trading And while here's hoping you

01:56

look good and either orange or black or or both

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