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There is a simple explanation for the rally in stocks this year. Explanatory hypotheses are valid if they generate testable predictions. This one does unlike a number of suggested alternative hypotheses that are not falsifiable.
Price action in S&P 500 since the November elections indicates that mean-reversion is still persisting in this smoothly uptrending market.
Until now I thought that the main problem of technical analysis is bias of all kinds. A tweet from N. N. Taleb yesterday got me thinking. Maybe there is a more serious problem than bias: thinking in words.
Six months are not responsible for all gains in stock market since 2000. This conclusion in some articles was based on the wrong choice of returns. The correct number is about 32.
Good out-of-sample results of a unique hypothesis may impress me but not naive statistics that demonstrate selective perception bias. Here is a recent example.
Unless one is fully invested in a single stock or ETF, portfolio returns depend on allocation. In the case of trading, returns depend in addition on risk parameters. Although this sounds trivial, some economists and bloggers do not seem to understand … Continue reading
Although the high of VIX was below 11 on January 27 of this year, the SPY ETF has gained 1.11% since. Some traders expected a quick rise in volatility and shorted the market but any gains in VIX evaporated fast … Continue reading
Someone I follow in Twitter made a comment yesterday that recent market activity is similar to that observed during summer months. Below I include some – mostly useless – statistics and the possible reasons for the subdued action.