Thursday, October 16, 2008

Two Bull Markets

(Click on the graphs to enlarge.)
In the midst of all the extraordinary asset price movements we have seen of late, here are two that particularly stand out. The VIX index, which measures expected stock market volatility, remains near all-time highs. So does the probability at Intrade that Obama will be the next president, which now stands at 85 percent.
Is the apparent comovement in these two series a coincidence? Probably not. All the recent bad news about the economy has been good news for investors who are long volatility or long Obama.