VOLATILITY in the up direction is not a problem — it’s only downward volatility that offers discourse. — Coreen T SolA lot of value investors shun concepts such as volatility, or standard deviation, as a measure of risk — and I’m sympathetic to that point of view. That said, the notion of risk is very time-dependent. For very short periods of time, volatility is a pretty good way to think about risk. I have kids in college and I have to write a check for their tuition, so volatility is a very important concept for me. I want to minimize my volatility so I can make sure I can write that cheque. Or if you go out to an options desk and say, "Options traders, we’re taking away your measure of implied volatility," they would actually be very much hamstrung. But if you take a long-term point of view, which most value investors do, then that idea of volatility melts away and, in fact, volatility becomes your friend. Risk then becomes the loss of permanent capital. — Michael MauboussinThe t...
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