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Analysis and Possible Prediction of Declines in the −5% to −15% Range

In: STOCK MARKET CRASHES Predictable and Unpredictable and What To Do About Them

Author

Listed:
  • William T. Ziemba
  • Sebastien Lleo
  • Mikhail Zhitlukhin

Abstract

In this chapter we discuss small stock market declines in the −5 to 15% area that are not predictable but might be expected at some unknown future time. We found that simple VIX versus S&P 500 graphs were helpful in analyzing and trading during crises such as the January–February 2016 decline following the first FED rate increase in seven years in December 2015. A major fear was not the rate increase itself but rather the fear of many more rate increases that never occurred. There were also concerns about Chinese growth and policy uncertainty and some concerns not very founded about growth in the United States. The discussion then covers the Brexit, the Trump election, the French election and the Trump-Comey bad scenario crisis.

Suggested Citation

  • William T. Ziemba & Sebastien Lleo & Mikhail Zhitlukhin, 2017. "Analysis and Possible Prediction of Declines in the −5% to −15% Range," World Scientific Book Chapters, in: STOCK MARKET CRASHES Predictable and Unpredictable and What To Do About Them, chapter 8, pages 185-208, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813223851_0008
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    More about this item

    Keywords

    Stock Market Crashes; Brexit; Trump; Financial Bubbles;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General

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