I think it was @ericlonners who first told me this really useful fact when we were at Cazenove together
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What does it mean in English?
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It's path-dependent, when that pesky 2nd derivative flips, so does the regime
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So the random walk theory can take a walk I presume Prof.
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Long periods of peace (volatility contraction) punctuated by short periods of war (volatility expansion)...
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totally true for sure
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In other words though there are equal amounts of big up and big down days big down days have subsequently higher distibution of big moves?
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This is fairly well known and consistent with down moves levering up companies in a MM sense and correlations moving higher in these events
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Very interesting, can explain some short-term trend follower (divergence) traders.
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Yes but it is squared returns (volatility clusters, not direction).
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