Dispersion - what does it mean?

 From the newsletter, Owenomics, we see that stock dispersion is at levels not achieved since 2008 and 2000. Now, this may not be an indicator of a market top, but it does tell us something about market behavior. 

Dispersion is not the same as volatility. Volatility measures deviations from the mean over a given time period. Dispersion measures the deviation of returns across a set of assets. It is a cross-sectional measure. Higher dispersion means there is a greater variation in the winners and losers relative to the mean return. This could mean there is a disruption in the current market regime or a rotation between industries and firms. It could mean there are a few very strong winners or losers.

Past periods of strong dispersion include the bursting of the tech bubble in 2000, the bursting of the housing bubble in 2008, and the Great Financial Crisis. Disruption leads to dispersion, but greater dispersion does not necessarily imply a general market decline.