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I came across what I consider to be a valuable stock market/economic
indicator, the Wright Model "B" yield-curve indicator. Using this
formula in Excel:
Probability = NORMSDIST(-2.17 - 0.76 x S + 0.35 x R)
where "S" is the spread (10-Year Treasury yield minus 3-month T-Bill
yield) and "R" is the Fed Funds rate, it gives the probability of
economic recession within the next 4 quarters. (Only about 44% right
now, so there's some good news. I envision using this as a market-exit
indicator, warning when conditions are about to turn really ugly for
both the stock market and the economy. )
This formula:
Z(x) = (1/(sqrt(2*pi()))*exp(-x^2/2))
appears to be the actual math represented by the NORMSDIST function. I
believe AB supports all the operations in this formula.
My problem is that I'm not math-savvy enough to make the leap from here
to turn this into a complete AB formula. I don't know what operation
the NORMSDIST formula performs on the Wright Model part, I don't know
what the "x" variable is supposed to be...there's no end to what I don't
know.:)
Any help from my superiors in the math field (undoubtedly a VERY large
club) would be greatly appreciated.
Luck to all,
Sebastian
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