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Strategies & Market Trends : ahhaha's ahs

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To: Bilow who wrote (1706)	4/5/2001 9:22:56 PM
From: ahhaha	Read Replies (1) of 24758

What I mean by volatility can't be defined is any method that pretends to compute it is inherently unstable. Volatility entails an attempt to compute the average amplitude of a fluctuation now versus the average amplitude of a fluctuation in some fiducial period. Which period is fiducial? The one that works, worked briefly, so briefly that the volatility measure has to be recomputed, and eventually recomputed daily. That defeats the purpose of fiducial. What is today's volatility? The expectation of yesterday's volatility, but amplitude fluctuation can be so great due to exogenous forces that volatility then has to be computed intraday. In theory this process should be continued until at the limit there is no volatility! There has to be a point sufficiently far in the past against which a volatility computation makes sense, yet no particular local period is adequately representative. This can be seen when a stodgy big board stock like LU changes its spots. What is an adequate fiducial period for LU? LU has progressively growing volatility or is it progressively declining volatility? The next exogenous shock will render the current volatility useless.

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