It warms my heart that we live in a society that provides employment of great consequence and social honor to the socially challenged. We all have our weaknesses but this is no reason to waste our strengths. As perhaps a case in point here’s a piece of a conversation on NPR’s “Marketplace” between host Kai Ryssdal and Robert Whaley, professor of finance at Vanderbilt. They’re talking about Whaley’s VIX, or Market Volatility Index, which essentially uses activity in portfolio insurance instruments to measure how “freaked out” the stock markets are. (I’ve modified NPR’s sloppy transcript very slightly so it makes more sense and accords with my memory.)
Ryssdal: All right, well let me ask you this, then: Is it not possible that knowing what’s coming creates more volatility, [that] a rising VIX creates a rising VIX?
Whaley: Oh, can you frame that question a little differently?
Ryssdal: Sure. Is it possible that this thing, knowing how nervous people are, makes people more nervous?
Whaley: Um, that would a behavioral type of interpretation. What makes me more nervous, actually, is sort of the movements that we’re seeing in the stock market on a daily basis. This VIX is just telling you that they suspect those types of movements to persist. But yes, I mean, you’re seeing that the price of insurance is going up, and so it makes you wonder, if you’re seeing the price rise, whether people smarter that know there’s going to be an event, so you might jump in too.
The question just doesn’t track at first for Whaley, who clearly hasn’t thought of the matter that way and whose strength is therefore clearly not ‘behavioral types of interpretation’ — that is, what people actually do and why.