Feb

21

Market Quiz, from Kim Zussman

February 21, 2011 |

Extreme monthly declines in SP500 are preceded by rising or falling markets?

(don't look until you guess)

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The mean of the 20 worst monthly declines in SP500 (1950-present) is -10.7%; the mean of the prior 6 month period was -4.6%:

One-Sample T: mo ret, pr 6mo

Test of mu = 0 vs not = 0

Variable   N       Mean     StDev   SE Mean          95% CI               T
mo ret     20  -0.10739  0.03419  0.00764  (-0.12339, -0.09139)  -14.05
pr 6mo    20  -0.04606  0.14976  0.03348  (-0.11617,  0.02403)   -1.38

Extra credit:

After a many month stock rally to 3 year highs, when the middle east
catches fire:

a. buy the dip
b. sell the dip
c. skip the dip and take a trip (thanks to professor Leary)

Russ Sears writes: 

The S&P has not quite hit its 3 year high and may not soon.

But looking at the previous points where S&P hit a 3 year high on the close and had not hit a previous 3 year high for at least 6 month prior from 6/53 to present there were only 17 such instances. It appears pretty bullish on the surface, see the comma delimited data below. I got 1038 new 3 yearly highs, that the 6 mnth prior cut-off boils down to only 17 seems to also imply bullishness, but how sure how to do such a significance test. This extra credit for the stats majors.

For the following 21 trading day periods (mnth) after a new 3 year high with no prior new 3 year highs in the previous 126 days (6 months).

stdev,2.39%,4.37%,3.50%,3.29%, 2.83%,3.82%,5.1%,5.1%,7.9%

max,6.2%,8.1%,6.1%,5.4%,6.6%,6.9%,11.8%,3.1%,18.6%

min,-1.6%,-9.2%,-7.6%,-5.3%,-4.3%,-7.1%,-9.8%,-0.6%,-7.9%
avg,2.98%,-0.68%,1.17%,1.01%,1.39%,0.75%,3.5%,3.1%,6.6%
positives, 14 , 8 , 14 , 12 , 12 , 10 ,14,13,13

1st mnth,2nd mnth,3rd mnth,4th mnth,5th mnth,6th mnth,sum mnth 1-3,sum mnth 4-6,sum mnth 1-6
 


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