Market Chaos Review

/Market Chaos Review

Market Chaos Review

By | 2017-08-18T17:01:04+00:00 August 8th, 2011|Research Insights|3 Comments

Meb has some great analytics and perspective on the recent turmoil in the markets:

http://www.mebanefaber.com/2011/08/04/gaining-some-perspective/

Meb’s post inspired me to churn out some quick research.

I analyzed the monthly returns from Jan 1, 1963 to Dec 31, 2010 on the SP 500, Value-weight CRSP, Equal-weight CRSP, and SMB.

First, the monthlies on the SP 500–lots of 15-20% blowouts.

The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are unmanaged, do not reflect management or trading fees, and one cannot invest directly in an index. Additional information regarding the construction of these results is available upon request.

Next, the drawdowns. There is nowhere to hide–even 5-year holding periods could leave you a$$ed out!

The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are unmanaged, do not reflect management or trading fees, and one cannot invest directly in an index. Additional information regarding the construction of these results is available upon request.

How about stress-events in the past? Well, the recent market blow-up is a dandy, but not extraordinary by any means. The October ’87 Crash still seems to maintain the trophy for “biggest market explosion in the shortest amount of time.”

The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are unmanaged, do not reflect management or trading fees, and one cannot invest directly in an index. Additional information regarding the construction of these results is available upon request.

A few folks have asked me for my two-cents on the recent market turmoil and the politics of the day. Here is all I have to say:


  • The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Alpha Architect, its affiliates or its employees. Our full disclosures are available here. Definitions of common statistics used in our analysis are available here (towards the bottom).
  • Join thousands of other readers and subscribe to our blog.
  • This site provides NO information on our value ETFs or our momentum ETFs. Please refer to this site.

Print Friendly, PDF & Email

About the Author:

After serving as a Captain in the United States Marine Corps, Dr. Gray earned a PhD, and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management that delivers affordable active exposures for tax-sensitive investors. Dr. Gray has published four books and a number of academic articles. Wes is a regular contributor to multiple industry outlets, to include the following: Wall Street Journal, Forbes, ETF.com, and the CFA Institute. Dr. Gray earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania.

3 Comments

  1. Highgamma August 8, 2011 at 9:25 pm
  2. […] Putting the carnage in some sort of historical perspective.  (Empirical Finance Blog) […]

  3. Reformed Trader August 9, 2011 at 3:54 am

    Yes, I think this is why Mebane Faber emphasizes trend-following so much. Return distributions look more normal for a trend-following strategy than they do for buy-and-hold, so the strategy suits itself better than buy-and-hold to the type of analysis that we’re used to, such as Sharpe ratios.

Leave A Comment