Can A Volatility Tsunami Be Predicted?

In algorithmic trading and risk management system development, a quest for the “holy grail” has been centered on creating a system that warns of forthcoming market volatility. While no system of risk management is perfect at warning about a significant stock market decline, Andrew Thrasher, a portfolio manager at Financial Enhancement Group, recently was the 2017 Charles Dow Award winner for a paper he wrote on “Forecasting a Volatility Tsunami.” In the paper, Andrew Thrasher makes the assertion that it is the suppression of volatility returns dispersion that has, in the past, led to higher market volatility.

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