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How well does the U.S. yield curve perform as a prediction market for S&P 500 prices? Is there a strong correlation between what investors expect will happen in

How well does the U.S. yield curve perform as a prediction market for S&P 500 prices? Is there a strong correlation between what investors expect will happen in 3-5 years (ie the yield curve), and what actually happens?

odonnellryan 8y ago
I think it's so hard to tie these together, because there are a lot of motivators that can lead to the yield curve inverting, also there are different yield curves that can invert. Currently talk is that the 5/30 is what we should look at, traditionally it is the 2/10, the one everyone is talking about now is the 3/5... and just one bps for the 3/5... and actually when people talk about the indicator they really mean for a quarter... well, some do. Sometimes people say a month. Or... some other amount of time. Basically it's a lot of noise. It doesn't mean nothing, but...
- pydeveloper22 8y ago
  Hi odonnellryan, My apologies in advance that this may not be the response you were looking forward to on forum question. But I discovered an older post online on the Hacker News site some time ago for a Remote Junior Programmer/Assistant at Luma. I noticed you were looking to make your first hire and find someone that has some knowledge in technologies such as Python and Linux. Well, I had completely forgot about viewing it and so I was checking out Hacker News job board today and saw it was for a remote Part/Full-time opening available at the Luma in the NYC area. Well I'm someone who enjoys coding and learning with Python as far as learning purposes/hobbies go. Plus, I'm someone who has been going the self taught route trying to break into the IT field/Python Development world. I also have interests in some of the things mentioned in the post such as finance/trading and business. But, more than anything.. I'd looking to further learn and grow in my skills as far as Python development goes. I don't have much experience with Django Web development but feel I can learn and pick up on it as well as with any other technology requirements quickly. After quickly reading your post on Hacker News I was encouraged and interested to reach out and contact you for more info. So with that said, here I am..and I wanted to inquire to find out if this opening is available? Or has it been filled? Also would you allow for training of junior developers to get up to speed? I had to ask because but I wasn't sure if you meant junior or for more seasoned developers. Also, you have a contact number to learn more about this position or information on the things you require in regards to the nature of the job to increase one's chances to be a part of your startup team? Any help in this matter will be greatly appreciated. Thank you Feel free to contact me at: pydeveloper22@gmail.com --K
anonu 8y ago
Financial time series are usually too noisy to make predictions on those time scales. In reality, there's also not enough data when your forecast window is that far into the future.
ctchocula 8y ago
To answer your question, I found this work [1] that uses yield curve information and a basic 200-day moving average. The rule it uses is simple: Go to cash if: (1) yield curve of 10-year treasury minus 2-year treasury has inverted and (2) S&P is below 95% of its 200-day moving average and (3) the next recession has not yet occurred. If in cash, buy if S&P is above 103% of its 200-day moving average. As can be seen, based on historical data from 1950-now the yield curve signal beats S&P 500 marginally (+110 basis points annually). However, I would not implement it as is, because this could be noise. Looking at the two tables above, the yield curve + 200MA strategy exhibits a problem commonly seen using these types of moving average strategies--whipsaws--which means buying in at a price and being forced by the strategy to sell at a lower price. In table 1, Buy in at at 65.24 and sell at 62.93 is an example of a whipsaw. [2] is an excellent resource if you are interested in learning more about these types of strategies. [1] https://seekingalpha.com/article/4183120-superior-investment-returns-courtesy-yield-curve?page=4 https://seekingalpha.com/article/4183120-superior-investment... [2] https://www.philosophicaleconomics.com/2016/01/gtt/ https://www.philosophicaleconomics.com/2016/01/gtt/

odonnellryan 8y ago

I think it's so hard to tie these together, because there are a lot of motivators that can lead to the yield curve inverting, also there are different yield curves that can invert. Currently talk is that the 5/30 is what we should look at, traditionally it is the 2/10, the one everyone is talking about now is the 3/5... and just one bps for the 3/5... and actually when people talk about the indicator they really mean for a quarter... well, some do. Sometimes people say a month. Or... some other amount of time. Basically it's a lot of noise. It doesn't mean nothing, but...

pydeveloper22 8y ago
Hi odonnellryan, My apologies in advance that this may not be the response you were looking forward to on forum question. But I discovered an older post online on the Hacker News site some time ago for a Remote Junior Programmer/Assistant at Luma. I noticed you were looking to make your first hire and find someone that has some knowledge in technologies such as Python and Linux. Well, I had completely forgot about viewing it and so I was checking out Hacker News job board today and saw it was for a remote Part/Full-time opening available at the Luma in the NYC area. Well I'm someone who enjoys coding and learning with Python as far as learning purposes/hobbies go. Plus, I'm someone who has been going the self taught route trying to break into the IT field/Python Development world. I also have interests in some of the things mentioned in the post such as finance/trading and business. But, more than anything.. I'd looking to further learn and grow in my skills as far as Python development goes. I don't have much experience with Django Web development but feel I can learn and pick up on it as well as with any other technology requirements quickly. After quickly reading your post on Hacker News I was encouraged and interested to reach out and contact you for more info. So with that said, here I am..and I wanted to inquire to find out if this opening is available? Or has it been filled? Also would you allow for training of junior developers to get up to speed? I had to ask because but I wasn't sure if you meant junior or for more seasoned developers. Also, you have a contact number to learn more about this position or information on the things you require in regards to the nature of the job to increase one's chances to be a part of your startup team? Any help in this matter will be greatly appreciated. Thank you Feel free to contact me at: pydeveloper22@gmail.com --K

anonu 8y ago

Financial time series are usually too noisy to make predictions on those time scales. In reality, there's also not enough data when your forecast window is that far into the future.

ctchocula 8y ago

To answer your question, I found this work [1] that uses yield curve information and a basic 200-day moving average. The rule it uses is simple: Go to cash if: (1) yield curve of 10-year treasury minus 2-year treasury has inverted and (2) S&P is below 95% of its 200-day moving average and (3) the next recession has not yet occurred. If in cash, buy if S&P is above 103% of its 200-day moving average. As can be seen, based on historical data from 1950-now the yield curve signal beats S&P 500 marginally (+110 basis points annually). However, I would not implement it as is, because this could be noise. Looking at the two tables above, the yield curve + 200MA strategy exhibits a problem commonly seen using these types of moving average strategies--whipsaws--which means buying in at a price and being forced by the strategy to sell at a lower price. In table 1, Buy in at at 65.24 and sell at 62.93 is an example of a whipsaw. [2] is an excellent resource if you are interested in learning more about these types of strategies. [1] https://seekingalpha.com/article/4183120-superior-investment-returns-courtesy-yield-curve?page=4 https://seekingalpha.com/article/4183120-superior-investment... [2] https://www.philosophicaleconomics.com/2016/01/gtt/ https://www.philosophicaleconomics.com/2016/01/gtt/