{"id":96704,"date":"2009-12-23T15:51:00","date_gmt":"2009-12-23T20:51:00","guid":{"rendered":"http:\/\/www.businessinsider.com\/chart-of-the-day-cboe-volatility-index-2009-vs-2008-2009-12"},"modified":"2009-12-23T15:51:00","modified_gmt":"2009-12-23T20:51:00","slug":"chart-of-the-day-investors-are-always-wrong-about-risk","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/96704","title":{"rendered":"CHART OF THE DAY: Investors Are Always Wrong About Risk"},"content":{"rendered":"
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If 2008 was a year that markets vastly underestimated risk, then 2009 was surely one when markets overestimated it big time.<\/p>\n

Shown below is the ‘Chicago Board Options Exchange Volatility Index’. aka the VIX. It’s a measure of the implied stock volatility (ie. risk) priced into the options market for S&P500 stocks.<\/p>\n

In 2008, options traders progressively (and at times violently) realized they had priced far too little risk into options prices, as shown by the rising VIX in blue.<\/p>\n

In 2009, the exact opposite happened, shown by the falling red line. Risk was consistently overestimated, and stocks rallied at the same time. Thus given the market’s track record, 2010 could deliver more volatility than traders are ready for.<\/p>\n

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