Aug

12

I looked at the average daily range (ln(high/low) ) on the S&P index for each calendar month since Jan 1969 — 487 months — and found a few interesting things.

1. The most volatile month was October with 1.79% after last year. This is true even with last 20 years i.e. no Oct 87. This was followed by Jan with 1.59%, then Sept 1.51% and Nov. with 1.50% with the least June at 1.33%

2. The following month is highly correlated to the prior month at 80%. The auto-correlation is to be expected, but I was surprised at how high it was.

3. But the change in volatility is negatively correlated at -15.45%,

4. I also looked at whether the volatility was accelerating,( getting bigger), or decelerating (getting smaller) and thought the following was interesting.

a. There were 233 accelerating months. Of these, 85 had back to back accelerations and 28 three time in a row 8 and 8 4 times 5

b. and 254 decelerating months with 106 back to backs, 38 triples and 14 quadruples, 4 five time in a row, 2 and 1 six and seven times in a row.

I would infer that there may be exponentially more energy into accelerating and breaking the longer it is sustained and therefore negatively correlated.

March was the only month since Oct. that vol has increased. Right now we have 4 months in a row decelerating, and currently August looks to continue with 1.39 average versus July 1.60


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