4 ms·

When financial bubbles burst the markets fall an average of something like 42% in the first two months.

Grimm1 7y ago
Except I don't know if I'd classify this as a bubble bursting this is a true blue recession driven by the pandemic. The market reacting to information of weak fiscal measures against people not spending. A bubble would be something that was artificially propped like 2008 fraud with cdos this just seems like simple economics at play to me. That said I'm no where near close to informed or experienced enough on these things to say for certain.
ahelwer 7y ago
Market movements follow a power law, not a normal distribution, so average is an utterly useless measure.
- generalpass 7y ago
  > a normal distribution Not really clear what you mean here. If you take the peak index value and its value two months into the bubble burst, the average value of this will be ~42% lower than the peak.
  - ahelwer 7y ago
    Right, but what is the purpose of statistics like this? The purpose is for them to inform our understanding of what might happen in the future. As mentioned above, since market movements follow a power law rather than normal distribution, the average gives us absolutely no information about what might happen. Thus this statistic fails at the goal of having a purpose; it is just a meaningless number, like those meme baseball statistics about who is the third-best thrower of fastballs on a rainy friday or whatever.
    - generalpass 7y ago
      > Right, but what is the purpose of statistics like this? The purpose is for them to inform our understanding of what might happen in the future. As mentioned above, since market movements follow a power law rather than normal distribution, the average gives us absolutely no information about what might happen. Thus this statistic fails at the goal of having a purpose; it is just a meaningless number, like those meme baseball statistics about who is the third-best thrower of fastballs on a rainy friday or whatever. Thanks for restating using almost the same words and using an apparently non-applicable analogy (i.e., the 42% covers all bursts effect on indexes, your sports example covers individual performance). My experience is people who provide such poor explanations usually don't actually know what they are talking about. Your claim on its usefulness makes assumptions about where to apply the information. The perma-bears use these kinds of numbers to demonstrate why being in stocks during a bubble is a bad idea.
      - ahelwer 7y ago
        I recommend you read Taleb. Much of his work focuses on the differences between domains following normal distribution vs power law, and the folly of mistaking one for the other.

Except I don't know if I'd classify this as a bubble bursting this is a true blue recession driven by the pandemic. The market reacting to information of weak fiscal measures against people not spending. A bubble would be something that was artificially propped like 2008 fraud with cdos this just seems like simple economics at play to me. That said I'm no where near close to informed or experienced enough on these things to say for certain.

ahelwer 7y ago

Market movements follow a power law, not a normal distribution, so average is an utterly useless measure.

generalpass 7y ago
> a normal distribution Not really clear what you mean here. If you take the peak index value and its value two months into the bubble burst, the average value of this will be ~42% lower than the peak.
- ahelwer 7y ago
  Right, but what is the purpose of statistics like this? The purpose is for them to inform our understanding of what might happen in the future. As mentioned above, since market movements follow a power law rather than normal distribution, the average gives us absolutely no information about what might happen. Thus this statistic fails at the goal of having a purpose; it is just a meaningless number, like those meme baseball statistics about who is the third-best thrower of fastballs on a rainy friday or whatever.
  - generalpass 7y ago
    > Right, but what is the purpose of statistics like this? The purpose is for them to inform our understanding of what might happen in the future. As mentioned above, since market movements follow a power law rather than normal distribution, the average gives us absolutely no information about what might happen. Thus this statistic fails at the goal of having a purpose; it is just a meaningless number, like those meme baseball statistics about who is the third-best thrower of fastballs on a rainy friday or whatever. Thanks for restating using almost the same words and using an apparently non-applicable analogy (i.e., the 42% covers all bursts effect on indexes, your sports example covers individual performance). My experience is people who provide such poor explanations usually don't actually know what they are talking about. Your claim on its usefulness makes assumptions about where to apply the information. The perma-bears use these kinds of numbers to demonstrate why being in stocks during a bubble is a bad idea.
    - ahelwer 7y ago
      I recommend you read Taleb. Much of his work focuses on the differences between domains following normal distribution vs power law, and the folly of mistaking one for the other.