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Market Volatility Not Yet at 2008 Highs

Stock market volatility is not yet at 2008 peak according to three popular measures, despite references to historic levels in some blogs and social media posts.

Below is a chart that shows the standard deviation and mean absolute deviation of daily SPY ETF returns, as well as, the Average True Range, in the last 17 trading days since the all-time high close on February 19, 2020.

It may be seen from the above chart that volatility, as measured by the three methods mentioned, has not reached or exceeded 2008 highs. Specifically, these are the numbers:

SPY ETF 17-Day Volatility 2008 High  March 13, 2020
Standard deviation 6.3% 4.5%
Mean Absolute Deviation 4.6% 3.6%
Average True Range 7.6% 4.2%

Even in last five days, volatility is not as high as in 2008 worst five-day period, as shown below:

SPY ETF 5-Day Volatility 2008 High  March 13, 2020
Standard deviation 8.4% 7.2%
Mean Absolute Deviation 6.1% 6.0%
Average True Range 9.9% 6.9%

Volatility  rose significantly in the last 17 trading days but it may increase in days ahead.

Note that in October 28, 2008, when volatility peaks, as shown on the above charts, some market participants thought that was the bottom. However, the market fell about 28% more until the bottom of March 6, 2009.

Finally, descriptive statistics are good for informational purposes but no one should rely on those for timing other than risk management purposes. Needless to say, many market participants get those simple statistics wrong, some due to inability to compute them correctly and others due to evaluating them them in the context of  wishful thinking.

Also see this article.


Charting and backtesting program: Amibroker

Data provider: Norgate Data

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