Standard Deviation of Algebraic Changes S&P, from Victor Niederhoffer
Many ask me why I don't adjust % wise rather than algebraically. A good reason is that the algebraic volatility of the market has not changed in 20 years. In other words the stand dev of a daily change was 14 in 1996 and is 14 today.
Period ending lvl stand dev
12 30 1995- 12 30 1998 1413 12
12 30 1998 12 30 2001 1144 17
01 30 2001 12 30 2004 1204 11
12 30 2004 -12 30 2007 1356 11
12 30 2007- 12 30 2010 1520 19
12 30 2010 12 30 2013 1801 14
12 30 2014-5 30 2015 2108 14
Another set of mumbo jumbo shibboleths lands in boot hill.
anonymous writes:
You may have a great point, and no one can force you. Let's hope the market won't either, lol…
My greatest problem with 20 year stats is that they reflected entirely different forces, rules and even psychology (AI is certainly different from humans). Of greatest worry is that cost of money has never been similar to current period, and so all the areas of the business of banking. That calls for changes in investing assumptions, which shouldn't kept static throughout.