Apr

26

No Uptick, from Kim Zussman

April 26, 2008 |

Knock knock!

Who's there?

Uptick.

Uptick who?

No Uptickrule 7/6/07

Some have suggested recent volatility may be linked to repeal of the uptick rule as of 7/6/07. Certainly volatility has been high since then, as shown by F-test comparing variance of post no-uptick with the prior period (at least in terms of SPY: stdev of cls-cls returns 93-7/5/07 vs 7/6/07-present):

Test for Equal Variances: post, pre1

95% Bonferroni confidence intervals for standard deviations

.     N     Lower    StDev     Upper
post   203 0.011560 0.012853 0.014457 (post-7/6/07)
pre1  3635 0.010327 0.010599 0.010885 (prior)

F-Test (normal distribution)

Test statistic = 1.47, p-value = 0.000

Levene's Test (any continuous distribution)

Test statistic = 18.53, p-value = 0.000

But in comparing the post-no-uptick period of 204 days to the 17 other non-overlapping 204 day periods since 2004, the recent period is not that unusual (see attachment: 1=post uptick, with 95CI for variances), and it would be hard to argue much beyond partial causation.


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2 Comments so far

  1. David Whitesel on April 27, 2008 7:32 am

    some data below might help with perspective; remember the Naz had its biggest vol day ever June 07 with its R2K rebalance.. the historical change in the uptick rule is told better by looking through the lens of longer time frame. These data below are for a year previous into the present. IMO the change was anticipated and the difference between the hi and low of open short interest is the bigger story as volatility is married to intent. the number of companies disappearing, is the missing information. broker dealers dont seem to be locating inventory in the classical sense. instead they are using differential sums of phantom shares to conduct operations.

    Date Gross SOI # of Companies Net chg + or - shares

    March 31,2008 9,657,092,223 3,189 * -121,109,481
    March 15,2008 9,778,201,744 # !3,203*^ +738,920,330
    Febr 15, 2008 9,049,271,361 3,220 +423,368,000
    Jan 30, 2008 8,625,902,108 3,223
    * New Low Companies
    # New High Shorts applied.
    ! All time High
    ^ Decade low

    CY 07 Net chg # of Companies - 86 peak 2006 to trough 2007
    Net chg SOI CY yr 2007 + 1 Bil 188 Mil

    DEC 30, 2007 8,112,753 852 3,209 -233 mil
    Nov 30, 2007 8,346,448,894 3,210 +330 mil
    Oct 31, 2007 8,017,331,406 3,207 28 recrd low # of compys

    Sept 15,2007 8,317,483,297 3,235 -684mil
    August 15, 2007 9,001,087,804 3,273 -337mil
    July 13, 2007 9,338,359,662 3,264 +166 mil

    June 15, 2007 9,170,589,817 3,274 +570mil.
    New recrd low est companies reporting
    May 15, 2007 8,400,778,928 3,281 +400MS New Record
    April 13, 2007 8,011,592,931 3,293 +118 MS

    March 26, 2007 7,893,983,530 3,287 +849 MS a Record
    February 27, 2007 7,044,297,013 3,292 + 160 M S
    January 12, 2007 6,884,364,389 3,279 -40 M S

    December 15, 2006 6,924,409,737 3,288 -80 M S
    November 15, 2006 7,004,368,041 3,311 -410 MS
    October 24,2006 7,414,701,519 3,312 +61 M S

    September 15,2006 7,353,774,333 3,294 +85 M S
    August 15, 2006 7,268,106,428 3,286 -129 M S
    July 14, 2006 7,139,899,294 3,300 - 149 M S

  2. David Brown on May 12, 2008 1:27 pm

    I don't like this at all. "Conditional Heteroskedasticity" — repeat it 50 times. Look up the definition if you have to. After you have done that, go ahead and take data from a period that had similar variance.

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