Down goes the Dow

I expect this will get lost in the noise, but I'll share some stuff anyway. Playing with the S&P 500 daily price data led me to learn some stuff. This may all be common sense to everyone else, but it wasn't to an idiot like me.

First, I recognize that price change behaviour looks chaotic, which might suggest a fractal character, or at least some kind of heavy tail, non-normal distribution of the price change data. Here is the distribution of > 17000 daily price changes, shown in blue as a histogram of real data, and in orange as a best fit normal distribution of the data (with calculated mean and standard deviation of 0.0341% and 0.9617%):

[IMG]http://i68.tinypic.com/2w3qlci.jpg[/IMG]

You need to look at it with a log scale to see what's happening at the fringes (tails), where you see a worst daily loss of 20% and a biggest daily gain of almost 12%:

[IMG]http://i64.tinypic.com/21n460y.jpg[/IMG]

As it turns out, those outliers in the tails on both sides have a YUGE influence on the market. If I delete the ten biggest daily gains (one for every 7 years, or 0.06% of all trading days), the market from 1950 to today would have looked like this, in comparison to actual:

[IMG]http://i63.tinypic.com/2pr8jkm.jpg[/IMG]

Or if I remove the ten biggest daily drops, we get this:

[IMG]http://i64.tinypic.com/qs9qqf.jpg[/IMG]

So, 0.06% of the daily changes account for about HALF(50%) of the overall change of the market; without the 10 biggest daily drops, the index would be twice its current value, or without the ten biggest daily gains, it would be half its current value. Pretty cool, hey?

That's cool and all, but doesn't tell us much. The next bit surprised me more. Earlier I wrote that it looks like price changes behave *almost* randomly. Let me explain...

If I asked you to imagine what the historical index would have looked like if it were entirely random, acting independent of any driving forces, you might have a similar expectation as I had; you might expect some kind of noisy curve with no evident rhyme or reason, and no obvious, evident patterns. I generated some random market histories by taking the 17000 daily % price changes, and then shuffling them in random order. The result shouldn't have surprised me (since I work with stats and probabilities in my professional life), but they did. Here is one randomly generated curve (black) compared to the actual S&P since 1950 (green):

[IMG]http://i67.tinypic.com/33w0ev9.jpg[/IMG]

The shocking part, to me, is that there are multi-year bull and bear markets, very similar to the real history, just occurring at different times.

In other words, using naïve statistical reasoning, we could look at the real dot com bubble and crash, and housing bubble and crash, and infer that, since they are very similar to randomly generated behaviour, they could very reasonably be explained as random occurrences, independent of actual market forces.

Now I'm not suggesting that's true, just that one could make that conclusion. See, the *completely random* curve contains aspects that look like patterns. Long term, persistent patterns.

Pretty cool, hey?

(this is still not the stuff I found most interesting; may post more later today, but really need to put in a few hours to justify my pay...)

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Mebbe Bebe wrote:

What's it like having a double digit IQ?

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Read Benoit Mandelbrot's The ( Mis ) Behavior of Markets .

More interesting stuff here ; https://mathinvestor.org/

Portfolio Visualizer has a Monte Carlo Simulation you might want to try . Here's an example using S&P 500 .

https://www.portfoliovisualizer.com/monte-carlo-simulation?s=y&fullHistory=true&adjustmentType=0&smoothingRate=75&historicalVolatility=true&volatility=12.0&endYear=2017&years=45&frequency=4&mode=1&inflationAdjusted=true&inflationVolatility=3.13&sequenceStressTest=0&inflationMean=4.26&startYear=1972&bootstrapModel=1&inflationModel=1&adjustmentPercentage=4.0&dof=30&adjustmentAmount=45000&allocation1_1=100&circularBootstrap=true&simulationModel=1&distribution=1&currentAge=70&bootstrapMaxYears=20&asset1=LargeCapBlend&lifeExpectancyModel=0&bootstrapMinYears=1&meanReturn=7.0&rollingAveragePeriods=3&initialAmount=10000

Now compare to what actually happened .

https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&mode=2&startYear=1972&endYear=2016&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&portfolio1=Custom&portfolio2=Custom&portfolio3=Custom&LargeCapBlend2=100

gold at 3 or 4 year highs.

this market does not like USD right now, and either do I.

Maybe the next crisis will be US Treasuries selling off even more.

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Not the smartest dude wrote:

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Mebbe Bebe wrote:

What's it like having a double digit IQ?

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Probably about the same as having room temperature IQ. ?

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wondering wrote:

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Ghost of Igloi wrote:

[quote]mister wrote:

Copied from the infatuated one who happened to plagarize due to improper citation.

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Please explain.

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Well is it wrote:

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Not the smartest dude wrote:

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Mebbe Bebe wrote:

What's it like having a double digit IQ?

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Probably about the same as having room temperature IQ. ?

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Well is it or not?

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wondering wrote:

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wondering wrote:

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Ghost of Igloi wrote:

[quote]mister wrote:

Copied from the infatuated one who happened to plagarize due to improper citation.

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Please explain.

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Bump

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Ghost of Igloi wrote:

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wondering wrote:

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wondering wrote:

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Ghost of Igloi wrote:

[quote]mister wrote:

Copied from the infatuated one who happened to plagarize due to improper citation.

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Please explain.

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Bump

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Dump.

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“Make sure that you do not copy verbatim more than two words in a row from the text you have found. If you do use more than two words together, you will have to use quotation marks. We will get into quoting properly soon. Cite - Citing is one of the effective ways to avoid plagiarism.”

Ways to Avoid Plagiarism — Plagiarism Checker | WriteCheck ...
en.writecheck.com › ways-to-avoid-plagi...

Are you referring to the post by Portia? That was clearly cited.

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Ghost of Igloi wrote:

“Make sure that you do not copy verbatim more than two words in a row from the text you have found. If you do use more than two words together, you will have to use quotation marks. We will get into quoting properly soon. Cite - Citing is one of the effective ways to avoid plagiarism.”

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Just funning....?

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Ghost of Igloi wrote:

Just funning....?

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Ghost of Igloi wrote:

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mister wrote:

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Ghost of Igloi wrote:

[quote]Porsche wrote:

Only two of our indicators on our world watch list have posted gains through Monday, April 9, 2018. The top performer this year is the 3 Month Treasury Bill at 1.74% killing the second place Hong Kong's Hang Seng with a minor gain of 1.04%. In third is India's BSE SENSEX with a fractional loss of 0.07%. In fourth is France's CAC 40 with a loss of 0.93%. Coming in last is London's FTSE 100 with a loss of 6.41%. So many other pitifull equity returns we will leave those out for now. We wouldn’t want the Bulls to cry.

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This coming from a guy who often cries slander.

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Copied from the infatuated one who happened to plagarize due to improper citation.

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So you think Portia plagiarized? Am I understanding this correctly?