Investing: 'Risk Budgeting,' a Tonic for Tricky Times

The equity markets move with dazzling speed, thanks to superfast computers and sophisticated algorithms. Yet even by the fast-paced standards of the modern stock exchange, the events of May 6 stand out. According to a joint Securities & Exchange Commission and Commodity Futures Trading Commission report dated May 18, at approximately 2:40 p.m. prices plunged "with extraordinary velocity." The major equity indexes "fell in excess of 5% within 5 minutes, and then immediately began a recovery that exceeded 5% within 10 minutes," says the report, Preliminary Findings Regarding the Market Events of May 6, 2010.

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