Market volatility set to rebound

There are several possible explanations for the declines in volatility in financial markets over the last year or so. Some have argued that volatility has simply returned to historical norms. Others have gone further and suggested that volatility might actually be lower in future than in the past, due to structural changes in key economies and financial markets. However, our analysis suggests that the current low levels of volatility are only a temporary lull and that future volatility is likely to be substantially higher for extended periods.