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Hi guys,
I found a very interesting chart in this week's Economist magazine.
It's in the special survey on risk called "Living Dangerously", and
part of an article called "Too Clever by Half" in that supplement
that suggests some tools (such as derivatives -- surprise, surprise)
that are designed to lessen financial risk, may actually be
increasing it.
Cut to the chase:
On page 9 of the special survey, you will find an interesting chart.
It shows, by quarters, the number of days per quarter that the S&P
500, the FTSE 100 or Nikkei 225 indices have moved by more than two
standard deviations.
The chart has a fairly clear dividing line, right around the
beginning of 1997. Since then, there is a clear, sustained increase
in the number of 2 Std Dev days. Perhaps this might indicate that a
system look back for effective walk forwards from here should go back
at least to 1/1/97? Perhaps this might indicate that there might be
differences in the return on systems before and after that date, or
that going back beyond 1997 might be crossing some sort of financial
"geological boundary layer"? I don't know, but I am sure these are
interesting questions. ^_-
Yuki
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