NASDAQ-100 Volatility — Difficult to Assess, but Not Extreme

Below is presented our analysis of the daily point volatility of the NASDAQ-100 Index. Although I normally like to talk about daily point volatilies, because there's no ambiguity about what that means, I'm presenting this series as an annualized returns volatility in percent because the substantial excursions of the NASDAQ indices over the past 15 years make it difficulte to make a concrete statement about what the "normal" level of volatility is, and removing the scale does seem to help somewhat. My guess would be that "normal" means about 25% per annum and, although the current level is in the 40's, it is nowhere near the extreme levels of either the late 90's or of the end of last year.

The innovations are driven by a Generalized Error Distribution and fit nicely to this with a spectral index of ≅ 1.2 — which is not that far from the Normal Distribution (which corresponds to 1.0 in the parameterization in use). I'm actually a bit suprised at the niceness of this distribution.