Part 2/8:
The Psychological Underpinning of Volatility
Digle argues that the root causes of market volatility are often psychological rather than technical. This perspective emphasizes the mood and behavior of market participants, particularly those who have experienced success during bullish markets. Digle identifies a significant risk of downside volatility stemming from an overly optimistic outlook held by many investors. He asserts that complacency in the face of economic headwinds can lead to a rude awakening should market conditions shift unexpectedly.