Thursday, August 4, 2011

Aug 4, 2011 "plunge" headlines are in the air tonight

Today's financial headlines are littered with the word 'plunge.'  Considering today's (cl-cl) drop on the S&P500 was just about -5%, I don't know that I would exactly call that a plunge.


                      Fig 1. Historical ts plot of S&P500 returns <= -5%

The following R code produced a time series plot of historical occasions where this occurred.

###################################################

library(quantmod)

getSymbols("^GSPC",from="1950-01-01",to="2012-01-01")
adj<-GSPC$GSPC.Adjusted
rtn<-(adj/lag(adj,1)-1)[2:length(adj)]
r05<-rtn[rtn<= -.05]

plot(sort(r05),type='o',main='S&P500 1950-present returns <= -5%')

###################################################
Although the frequency of such occurrences is  arguably rare, the 1987 drop is much more worthy of the 1 day label 'plunge.'

One other disturbing observation in the data, however, is the large temporal clustering of occurrences in the recent 2008 region.  Now that's behavior to be concerned about (not to mention revised flash crash data pts.).

filtered 1 day cl-cl returns <=-5% sorted by date

Posted by Intelligent Trading at 3:44 PM
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4 comments:

  1. Stephen KinsellaAugust 6, 2011 at 7:04 AM

    Hi,

    I'm just getting started using R for research and teaching. I've been trying to bring in bond market data to R for a few hours with very little success. Is there a trick I'm missing?

    Thanks again for this blog, it's been a lifesaver trying to get up the R curve as an economist.

    Best,

    Stephen

    ReplyDelete
  2. Intelligent TradingAugust 7, 2011 at 3:08 AM

    Stephen,
    If you have a yahoo symbol you can just
    use with TNX 10yr as example:
    library(quantmod)
    getSymbols("^TNX")

    Alternatively, you can go to a historical site like http://www.federalreserve.gov/releases/h15/data.htm then download the file of interest locally to your drive as a .csv file.
    You can then read and clean up into R as a time series object.

    ex:
    twoyr<-read.csv("C:/Stuff/bonds.csv",skip=20,colClasses=c("character","numeric"),na.strings='ND',sep=",",col.names=c('Date','yield'))

    #clean up ND data & convert to zoo and data frame objects if desired
    twoyr<-twoyr[!is.na(twoyr$yield),]
    twoyrzoo <- zoo(twoyr[, 2], as.Date(twoyr$Date, format = "%m/%d/%Y"))
    twoyrdf<-as.data.frame(twoyrzoo)
    names(twoyrdf)<-'yield'

    Hope that helps,
    IT

    ReplyDelete
  3. AnonymousSeptember 4, 2011 at 9:33 AM

    If you are already using quantmod in R you could also go to the St. Louis fed aka FRED if you know what your series ID is...

    Get the 1-Year Treasury Constant Maturity Rate like so...

    tcmr1y <- getSymbols('DGS1',src='FRED',auto.assign=FALSE)

    tcmr1y now holds your time series or rates...

    Cordially,

    -DD-

    ReplyDelete
  4. Intelligent TradingSeptember 5, 2011 at 11:37 PM

    Looks much simpler,
    thanks DD.

    ReplyDelete

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