Title: Why does market volatility matter? | Yale Insights
Headings: Why does market volatility matter?
Why does market volatility matter?
Q: Could we start with the basics? What is volatility and where does it come from?
Q: We've seen high stock market volatility following the financial crisis and again this year. How should we understand these spikes?
Q: Is that an emotional reaction or a rational response to just not knowing?
Q: Isn't the expression, "The market can stay irrational longer than you can stay solvent"?
Q: Is there a difference between how an individual should respond to volatility versus a larger organization?
Q: Can you talk a little bit about how volatility is measured?
Q: Is there typically a hangover effect after a period of high volatility?
Q: Do these periods of very high volatility have effects on the institutions around the market? For instance, did it make it hard for new companies to launch or to find funding?
Q: So you wouldn't advocate for some ideal level of volatility or trying to institute a transaction tax to reduce volatility in some ways?
Q: Could you talk about how you think about volatility in your own activities at Zebra Capital?
Q: If these stocks are undervalued because of their lower liquidity is it harder to then sell them at a fair valuation later?

Content: The uncertainty comes from real events. You're always trying to figure out how those events will impact the future. That's difficult to do. Now, that is mixed with the emotions, and perhaps overreactions. But if they were really clear overreactions, we could say, when they overreact and buy too much, we want to be on the sell side, and when they overreact in the other direction, we want to be on the buy side. I have an investment firm where we try to take such contrary positions in order to take advantage of overreactions. But that, too, is very difficult to do. Q: Isn't the expression, "The market can stay irrational longer than you can stay solvent"? You can have distortions that may be easily recognizable without it being possible to capitalize on them.