Professor Menachem Brenner is interviewed by Wall Street Journal
Wall Street's Volatility Pioneer Searches for Latest Fear Trade
- A researcher whose work foreshadowed the VIX now has his eye on an entirely different barometer of market uncertainty - ambiguity
(original article on The Wall Street Journal, Mar 10, 2017)
"Investors these days are puzzling over the lack of volatility on Wall Street. Menachem Brenner hopes they’ll soon be buzzing about a new indicator: the heightened level of ambiguity.
"The VIX is low because it doesn’t measure ambiguity. The uncertainty is much bigger than that,” Mr. Brenner said. “I believe that’s what ambiguity is going to capture.
"Ambiguity is a measure of the degree of confidence investors have in the probabilities they use to make decisions. The concept has been around for ages, but Mr. Brenner and Yehuda Izhakian, a professor at Baruch College, are quantifying what has historically been an abstract theory, hoping to better explain the world’s complexities. They intend for it to become a trading tool, like the VIX.
“I hope that it will become standard and this will be a measure that can be quoted in real time."