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JPMorgan Sees `Violent' Markets on Volatility-Liquidity Loop

  • Strategist Kolanovic says price swings create ‘feedback loop’
  • Decline of active management seen as major stability risk
Updated on

Marko Kolanovic is blaming a “negative feedback loop between volatility and liquidity” for topsy-turvy markets.

The negative correlation between volatility and liquidity has been getting stronger over time, according to the JPMorgan Chase & Co. global head of macro quantitative and derivatives research. As volatility rises, market depth declines exponentially, exacerbating price moves, he said.