Blame Twitter for the Death of Volatility?

Blame Twitter for the Death of Volatility?

Author: Mark Gilbert / Source: Bloomberg Gadfly Mark Mobius, the executive chairman of Templeton Emerging Markets Group, reckons he's iden

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Mark Mobius, the executive chairman of Templeton Emerging Markets Group, reckons he’s identified a surprising culprit for the slump in volatility currently afflicting financial markets — the rise of social media. Moreover, a survey of 2,800 millionaires in seven different countries by UBS Group AG’s wealth management unit delivers at least some support to his contention that a glut of untrustworthy information is suppressing price moves.

Mobius told Bloomberg News in an interview last week that people’s attention spans are getting shorter as the output from social media increases. As a result, he says investors end up sitting on their hands rather than reacting to new information:

Social media is having a huge impact. It’s creating confusion with a lot of false news. Ironically, it’s having a calming effect. If you have all this confusing information, and you don’t know which one is true and which one is false, you say, “OK, the heck with it, I won’t do anything.”

The collapse in U.S. stock market volatility, with the VIX index dropping to the lowest level since 1993, has been widely reported. Somewhat less remarked upon are corresponding slumps in foreign exchange swings to the lowest since September 2014 (according to Deutsche Bank’s currency volatility index), and in U.S. Treasury market volatility to levels not seen since the end of 2014 (according to Merrill Lynch’s MOVE index).

The declines come as the number of active monthly users of Twitter Inc.’s 140-character…

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