If last Thursday's big point drop in the stock market-the latest of a series of such dips since midsummer-made you think stocks are more volatile than ever, you're right.

But if you think this volatility is mostly due to the huge number of small new companies that in recent years have gone public, gotten hot for a while, and then flamed out, think again.

The real source of the market's dizzying swings is the large-cap stocks, the big companies that populate the Standard & Poor's 500 stock index.

According to Anthony Chan, chief economist at Banc One Investment Advisors, the degree of price fluctuations in the S&P 500 since 1991 has risen by more than double the level seen in the Russell 2000 Index, which tracks smaller companies.

To Mr. Chan, the conclusion is direct and clear: "Large-cap stocks (have) experienced more than twice the volatility of small-cap stocks during the latest expansion."

This is a major shift in trading patterns that has increasingly characterized market activity during the enormous 15-year bull run in stocks.

Until the early 1980s, Mr. Chan said in his report, prices of large and small-cap stocks fluctuated at about the same levels. Since then, however, large caps as a group have tended to jump around much more than smaller companies.

The main reason for this increased volatility, Mr. Chan determined, is fairly easy to understand: Globalization.

Nearly 40% of the S&P 500 companies' profits are now generated abroad. That exposes their stocks to all sorts of economic risk and swings in foreign currency values that are not faced in similar ways by smaller companies not yet relying heavily on foreign sales.

The mid to large-cap companies in the S&P 500 have an average market value of $10 billion, while smaller companies in the Russell 2000 have average capitalization of $200 million.

However, Mr. Chan found that simply doing business abroad has little to do with stock price volatility. Instead, global investing in stocks is the real culprit behind wide swings in share prices.

More money is moving across international boundaries than ever before through mutual funds and hedge funds, Mr. Chan observed. And this money is responding to market information faster than ever.

For example, last Thursday's market spasm in New York was not triggered by bad earnings news from any major corporation-certainly not from banks, which reported solid third-quarter earnings.

Nor was any fresh economic indictor involved. Indeed, the data released that day indicating higher jobless claims seemed to support the notion of a slowing economy with minimal inflationary pressures.

Instead, the fall in New York was traceable to a terrible day for stocks in Hong Kong that was prompted by fears of a spreading Asian currency crisis. Though important, the news seemed to have a larger impact than it should have here.

Analysts and traders quickly summed up the situation with a often-used phrase: The market had overreacted.

As Mr. Chan assesses it: "As international mutual funds that invest in regional or international financial markets have increased in popularity, we are seeing flows move in and out of the markets often in response to changing market perceptions" as well as economic data.

As a result, the jump in large-cap stock volatility is probably due to factors "that have little to do with underlying economic fundamentals."

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