Jan

13

Assessing causes

January 13, 2025 |

an excellent study explaining moves of over 2.5% in all markets attributing the moves to monetary factors:

What Triggers Stock Market Jumps?
Scott R. Baker, Nicholas Bloom, Steven J. Davis and Marco Sammond, 9 December 2024

We examine next-day newspaper accounts of large daily jumps in 19 national stock markets to assess their proximate cause, clarity as to cause, and geographic source. Our sample of over 8,000 jumps, reaching back to 1900 for the United States, yields several novel findings. First, news about monetary policy and government spending triggers twice as many upward jumps as downward ones and a highly disproportionate share of all upward jumps. Second, upward jumps due to monetary policy and government spending are much more frequent after a stock market crash. In this sense, the “Fed put” emerged decades before the 1990s, extends to other central banks, and characterizes fiscal policy as well. Third, greater perceived clarity about the reason for a jump foreshadows lower market volatility. Clarity trends up over the past century and is unusually high for jumps triggered by monetary policy. Fourth, leading newspapers attribute 38 percent of jumps in their own national stock markets to US economic and policy developments. The US role in this regard dwarfs that of Europe and China.

daily moves of 2.5% in the HBS study but explanations of reasons for moves are retrospective and can't be objective. its a "monetary" reason rather than ineluctable random reason following a major decline.

one was looking for research on the fate of markets. one believes that underneath the upward drift of 10000 % per 125 years there is a fate factor that brings markets to fates like 100000 in bitcoin and 50000 in dji, 7000 in sp.

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