Jan

26

SPY lost 2.5% last week. It has been 23 weeks since it dropped more than 2%. From 1993-present, checked for weeks down more than 2%, and the wait time (in weeks) between such drops. Then checked return of the following weeks.

First here are mean return weeks after 2+% drops regardless of wait times:

One-Sample T: nxt wk

Test of mu = 0 vs not = 0

Variable    N      Mean     StDev   SE Mean          95% CI            T

nxt wk    151  0.0020   0.0400  0.0032  (-0.0044, 0.0084)          0.62

Mean up 0.2% with SD of 4%

Here are mean returns of weeks after 2+% drops, for waits between such
drops longer than 20 weeks:

One-Sample T: nxt>20

Test of mu = 0 vs not = 0

Variable   N       Mean     StDev   SE Mean          95% CI             T
nxt>20    12  -0.0021  0.0192  0.0055  (-0.0143, 0.0101)       -0.38

>>Down -0.2% with about half the volatility: SD = 1.9%

(volatility clusters).

This is consistent with the sign of slope coefficient for regression of
next week's return vs wait time (though NS):

Regression Analysis: nxt versus wait_1

The regression equation is
nxt = 0.00240 - 0.000071 wait_1

Predictor        Coef    SE Coef      T      P
Constant     0.002405   0.004269   0.56  0.574
wait_1     -0.0000706  0.0003814  -0.19  0.853

S = 0.0403364   R-Sq = 0.0%   R-Sq(adj) = 0.0%

>> rather than waste time on analysis it is easier to just wait for Rocky's calls.


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