There was nearly a four-hour outage on the New York Stock Exchange Tuesday. But, it was a rough day for stocks all around: The DOW shed 261 points. China’s stock market plunged. Not to mention the ongoing fear about Greece’s financial debt. We can say then, with some degree of certainty, that the day was not the best for investor confidence. Donald Shelly teaches Finance at SMU’s Cox School of Business, he speaks with the Texas Standard about different ways investors keep tabs on the dynamic markets.
“Let’s remember first that the stock market is the ultimate voting booth,” Shelly says. “People vote with their dollars. If they’re confident they’re buying and if they’re not confident they’re selling…. They weren’t confident yesterday. But we’ve had really an amazing run over the last six years in the U.S. stock market….I think that’s a good barometer of confidence.”
Another measure of a healthy marketplace? Shelly says it’s called the Vix Index, or the Chicago Board Option Exchange Volatility Index. It’s a higher-level index, something the average investor isn’t concerned with.
“It measures the volatility of stocks on the S&P 500. Basically, it’s a 30-day volatility gauge. It’s driven by activity on the options exchange,” Shelly says. “Yesterday we saw that jump from about 16 to 19.5 — almost a 20 percent increase in one day. That’s a big increase even for the Vix.”