Aaron Brown, Columnist

What History Says About Low Volatility

Volatility is lower than average historical levels, but it’s at levels typical of the bottom of a quiet period between two crises.

July 3, 2017 at 9:30 AM UTC

By Aaron Brown

Aaron Brown is a former head of financial market research at AQR Capital Management. He is also an active crypto investor, and has venture capital investments and advisory ties with crypto firms. He is the author of the soon-to-be-released "Wrong Number."

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For all that's being said and written about the lack of volatility in financial markets these days, you might think something unusual is going on. In fact, history suggests it's the opposite.

The pattern is pretty clear when one considers realized 30-day volatility for the S&P 500 Index on an annualized basis going back to 1927. Every five years or so volatility rises above 20 percent for a year or two, sometimes getting much higher but usually not, and in between it sweeps out a shallow bowl-like trading pattern that bottoms at about 10 percent. That seems to be exactly what is happening now.