Market Measures - October 5, 2020 - Clustering of Large Moves


Oct 05 2020 8 mins   9
“Normal” market moves i.e., less than 1% daily change, are largely independent, meaning that they have the same chance of occurring on any day as they do directly after a “normal” day occurs. However, when it comes to outliers i.e., 2%+ change, it is multiple times more likely to see another one of those outliers directly after one has just occurred compared to seeing one on a randomly selected day. This can be interpreted as super high volatility environments having some clustering aspect to them like low vol environments.