Where Has the Volatility Gone?

A recent post by Bob Pisani pointed out 3 reasons for the low volatility:

1- Thanks to advances in trading technology, the market has become extremely efficient. "With automated traders and news box traders the prices of stocks — supply and demand — is extremely efficient",

2- Exchange-traded funds are reducing volatility because you can trade the ETFs without trading the underlying stocks,

3- The Fed has tamped down volatility for years by keeping rates low and essentially encouraging people to buy equities due to its quantitative easing program.

Regarding  #3, Mallick et al has confirmed:

Our preliminary findings are that an unexpected loosening of monetary policy - through a cut in the federal funds rate in the pre-crisis sample or an increase in bond purchases post-Lehman - typically leads to a decline in both expected stock and bond market volatilities and the term premium. Read more

As for #1 and #2, we are not aware of any research supporting these arguments.

Let us know if you know of any.