A yo-yo is a toy consisting of an axle connected to two disks, and a string looped around the axle. It has some similarities to a slender.


What is ‘Yo-Yo’

Yo-yo is slang for a very volatile market; the name comes from the movements of a yo-yo, where security prices continually go up and down. A yo-yo market has no distinguishing features of either an up or down market, taking on characteristics of both. Security prices in a yo-yo market swing very high to low over a given period of time, making it difficult for buy and hold investors to profit.

Explaining ‘Yo-Yo’

Yo-yo markets can, however, be profitable environments for astute traders who are able to recognize buy and sell points and make trades before the market reverses. These markets are characterized by steep up and down movements in share prices that can occur within a short timeframe, such as weeks, days or even hours. The movements are often abrupt, without warning, and they usually involve a majority of the stocks moving in unison. Traders on Wall Street also refer to this kind of activity as “all or nothing” when everything about the market is either good or bad.

A Recent Example of a Yo-Yo Market

Since the market crash of 2008, the stock market has become more volatile, driven in some part by its hypersensitivity to macro events. However, the occurrence of yo-yo markets is still rare, especially those that last for several days or more. They are more likely to occur when market volatility picks up following a protracted rise in stock prices, which can tend to make investors nervous. For example, during the first six months of 2015, the Dow Jones Industrial Average (DJIA) never fluctuated up or down more than 3.5% as it rose to record heights. Then, in August, a convergence of macro issues, such as China’s slowing economy, crashing oil prices and the prospect of higher interest rates, sent the stock market in a steep decline.

Further Reading

  • The effect of financial liberalization on the efficiency of Turkish commercial banks – www.tandfonline.com [PDF]
  • Comparative economics of some Islamic financing techniques – papers.ssrn.com [PDF]
  • Financing rural health services in China in the context of economic reform – onlinelibrary.wiley.com [PDF]
  • On the optimum financial environment for worker cooperatives – link.springer.com [PDF]
  • Does sports performance influence revenues and economic results in Spanish football? – papers.ssrn.com [PDF]
  • LAOS: An Episode of Yo-Yo Economics – www.jstor.org [PDF]
  • Coping with yo-yo transitions: Young adults' struggle for support, between family and state in comparative perspective – books.google.com [PDF]