Their methodology is based on a generally accepted stock price evolution, along with its expected volatility ranges, and an extrapolation as to how that volatility should behave.
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At the same time, I do think there are some individuals who, frankly, hold a smaller percentage of equities today than they did historically for quite good reasons, which is just, namely, that the volatility in the markets and the expected volatility in markets is greater.
As could have been expected, volatility spiked on the news.
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In recent days, the VIX Index, a measure of expected stock market volatility has been double the historic norm.
On February 4th Moody's said it was considering a new rating system for structured securities, using numbers, not letters, and a suffix that would indicate the expected level of volatility.
In finance parlance and first described by Markowitz, this is an improved efficient frontier for portfolios: higher expected return for a given level of volatility, or lower volatility for a given level of expected return.
Assets with low expected returns and high volatility are not part of the efficient frontier.
Nevertheless, equities remain a hard sell and volatility is expected to continue, according to general consensus.
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Each year, I analyze the primary drivers of asset class long-term returns including risk as measured by implied volatility, expected earnings growth based on GDP estimates and foreign business expansion, market implied inflation based on the spread between long-term Treasury Bonds and TIPS, and current cash payouts from interest and dividends on bond and stock indexes.
Modern portfolio theory advocates blending asset classes to maximize expected return and minimize portfolio volatility.
Stock Options are dependent on six assumption but stock price, volatility, and expected term are typically the most important.
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For any portfolio that includes an allocation to gold, there is a better portfolio, one with a higher expected return or a lower volatility that has a zero allocation to gold.
In fact the current investment strategy has yielded a portfolio expected to have 10 percent less volatility over time.
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While he expects volatility ahead of the expected fall launch of the iPhone 5, he sees shares driving higher toward year-end.
Doing this reduces portfolio volatility and can actually improve expected return.
Better-than-expected earnings and a lack of additional downward volatility are keeping investors very optimistic.
Volatility and unforeseen tragic events should be expected.
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Periodic bouts of volatility may persist but nonetheless, growth is expected to be higher on the whole.
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Hence, when equity markets volatility increases, or the perception that equity markets volatility will increase, additional flows can be expected into Gold investment strategies.
This is done by extrapolating a company's earnings out five years, then weighing its expected earnings and dividend streams against its historical stock price volatility (reflecting risk) and the AAA bond yield (reflecting opportunity cost).
The standard portfolio rule says that your stock percentage should rise with the expected return (stocks and bonds) divided by squared return volatility.
"The economic downturn, combined with the current uncertainties, extreme market volatility and a decline in both consumer and business confidence, are expected to continue taking their toll on demand for tourism -- at least in the short to medium term, " the latest edition of the UNWTO's World Tourism Barometer, said.
The point is that administrations are always crafting long-term spending plans for defense and other facets of federal activity, and those plans almost never work out the way they were expected to because we live in a world of two-year political cycles and great global volatility.
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Global market volatility brought the market for new listings to a virtual halt over summer but they are expected to pick up again in the final months of this year.
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