May

26

 It is common in athletic events for the sagametricians to say at certain points, things like "the home team has won 87% of their games when ahead by 2 or more run in the seventh inning." Or "the bigs have gone on to win 92% of their 7 game series when they win the first two".

Most of these utterances are completely consistent with randomness. But the question emerges: is there a time in the market when the scales are taken out and Zeus decides whether Achilles or Hector will win the battle based on the calculations from his sexy partners or even his own volition. I would hypothesize that 1:30 pm Eastern Standard is the key hour where the scale is tipped and the market decides whether to head further up or down.

David Hillman comments: 

Exactly the hour when our dear departed Ed's 'big boys' return from lunch sated by filet or dover sole and are deciding if they will dine with their sexy partners that evening at Daniel or take them to Nathan's for a full dress dog. No more testing of the hypothesis seems required.

anonymous writes: 

I believe that there is much to this post from the Chair.

Much of the difference in technique required to trade different financial instruments is due to this type of error in my opinion.

These points are open to conjecture but they are certainly thought provoking:

To say something like, "every time the Dow does X then the result has been Y with such and such summary statistics over the past 100 years". Arguably it has some pitfalls in common with the sports analogy, namely, the composition of the stock index (sports team) has not been constant over the entire test period and so one may not be comparing apples with apples. This is mitigated somewhat by phenomena with a relatively larger number of occurrences.

Stretching it a little more, the LA Lakers team of Magic Johnson and Kareem AJ (wow! What an era - do you remember the playoffs against Boston in the 1980s) is different from that of today. The "Y when X" piece may continue but I think it is these type of statistics that end in Black Swan events. With AAPL being in the DOW, the index arguably has different characteristics than when when U.S. Steel ruled the show.

It is my view that analysis of the major currencies does not suffer from any of this as a JPY is a JPY is a JPY. By the same token one should consider theoretically calculated EUR data before its launch as trash and one may need to change analysis if Greece were to depart the single currency. I believe the same is true of commodity futures markets (grades, etc aside).


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