Economic and liquidity indicators do a fantastic job of leading volatility. The below is an excerpt from our 2016 Understanding Volatility report. Central bank suppression of volatility is like trying to prevent forest fires by indiscriminately putting out all fires no matter how small. Although in the short-run there are no big fires, this often leads to denser trees and debris in many forests, which enables unusually large wildfires to burn.
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Understanding Volatility: back with a…
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Economic and liquidity indicators do a fantastic job of leading volatility. The below is an excerpt from our 2016 Understanding Volatility report. Central bank suppression of volatility is like trying to prevent forest fires by indiscriminately putting out all fires no matter how small. Although in the short-run there are no big fires, this often leads to denser trees and debris in many forests, which enables unusually large wildfires to burn.