Unprecedented volatility set to continue into 2013

What factors are driving volatility in the equity markets?

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Steve Michael, Stonehenge Asset Management
Equity volatilities have been heading lower since the fourth quarter of 2011. Volatilities peaked with the height of the European bond crises, which also coincided with the height of the correlation between equity markets and commodity indices.

We have seen a recent spike in volatilities due to the market reaction to weaker economic data. Long-dated volatilities offer good value today. The VIX futures curve would suggest higher volatilities in the front e