Nov

27

Below is the distribution of months between the chronological record of the 100 largest declines in S&P futures from January ‘01 to date. Starting with the January 2, 2001 decline of 27.1 points and ending with today’s, decline of 19.3 points, they range in size from a 57.0 point decline on 9/19/2001 to a 17.3 point decline on 8/28/2001.

Months Between Consecutive Declines in Top 100
Number of Months Number of Observations
0 61
1 28
2 03
3 03
4 02
6 01
14 01

The average duration between each of the top 100 declines was 1.5 months. A time series of the durations between consecutive large declines however shows that the average duration between them was 1/3 of a month in 2001, 1/4 of a month in 2002, 1 month in 2003, 1 and 3/4 months in 2004 , 14 months in 2005, and 2 months in 2006.

Kim Zussman adds:

Since late 2003, big daily moves (up or down more than 1%) look to be less frequent, as well as smaller, which fits with the secular decline in volatility. The frequency change is shown by counting moves per year:

Year Down Up Up/Down
2006 13 13 1
2005 21 16 0.76
2004 22 23 1.05
2003 38 42 1.11

The ratio of up/down is 1 or more for all years, except for 2005 (Which fits with other studies suggesting interval-returns scale contemporaneously to count down days).

Another observation is that yesterday’s decline is the first in a while, whereas big advances have been more evenly spaced. In fact when ranking gaps between big declines, yesterday’s was the longest hiatus dolor of any since January 2003.


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