Difference between revisions of "2020 Stock Market Crash"

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! Class !! Description
 
! Class !! Description
 
|-
 
|-
−
| 1 || Flash crashes and other short term market anomalies.
+
| 1 || Flash crashes and other short-term market anomalies
 
|-
 
|-
−
| 2 || Short to medium term economic disturbance
+
| 2 || Short to medium term economic disturbances that are limited to a sector
 
|-
 
|-
−
| 3 || Full-blown economic crisis
+
| 3 || Economic crisis
 
|}
 
|}
  
 
My starting list comes from [https://en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_markets a list of stock market crashes].
 
My starting list comes from [https://en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_markets a list of stock market crashes].
 +
 +
Using the largest decline on the Dow of the period as the crash day gives:
 +
 +
 +
 +
===Data driven approach===
 +
 +
Identify crashes as using the largest single-day declines on the DJIA:
 +
{| class="wikitable"
 +
! Date !! Open !! High !! Low !! Close !! Adj Close !! Volume !! SingleDayChange
 +
|-
 +
| 10/19/1987 || 2046.670044 || 2164.159912 || 1677.550049 || 1738.73999 || 1738.73999 || 87230000 || -22.6%
 +
|-
 +
| 10/26/1987 || 1864.219971 || 1881.800049 || 1774.040039 || 1793.930054 || 1793.930054 || 35420000 || -8.0%
 +
|-
 +
| 1/8/1988 || 2046.579956 || 2058.689941 || 1898.040039 || 1911.310059 || 1911.310059 || 27440000 || -6.9%
 +
|-
 +
| 10/13/1989 || 2753.280029 || 2773.360107 || 2545.48999 || 2569.26001 || 2569.26001 || 37620000 || -6.9%
 +
|-
 +
| 10/27/1997 || 7714.399902 || 7714.419922 || 7159.919922 || 7161.200195 || 7161.200195 || 91830000 || -7.2%
 +
|-
 +
| 8/31/1998 || 8052.450195 || 8095.450195 || 7539.069824 || 7539.069824 || 7539.069824 || 117890000 || -6.4%
 +
|-
 +
| 4/14/2000 || 10922.84961 || 10922.84961 || 10201.53027 || 10305.76953 || 10305.76953 || 267580000 || -5.7%
 +
|-
 +
| 9/17/2001 || 9580.320313 || 9580.320313 || 8883.400391 || 8920.700195 || 8920.700195 || 565600000 || -7.1%
 +
|-
 +
| 9/29/2008 || 11139.62012 || 11139.94043 || 10365.4502 || 10365.4502 || 10365.4502 || 385940000 || -7.0%
 +
|-
 +
| 10/7/2008 || 9955.419922 || 10124.03027 || 9436.669922 || 9447.110352 || 9447.110352 || 362520000 || -5.1%
 +
|-
 +
| 10/9/2008 || 9261.69043 || 9448.139648 || 8579.19043 || 8579.19043 || 8579.19043 || 436740000 || -7.3%
 +
|-
 +
| 10/15/2008 || 9301.910156 || 9308.759766 || 8530.120117 || 8577.910156 || 8577.910156 || 374350000 || -7.9%
 +
|-
 +
| 10/22/2008 || 9027.839844 || 9027.839844 || 8335.299805 || 8519.209961 || 8519.209961 || 348840000 || -5.7%
 +
|-
 +
| 11/5/2008 || 9616.599609 || 9616.599609 || 9111.469727 || 9139.269531 || 9139.269531 || 264640000 || -5.0%
 +
|-
 +
| 11/19/2008 || 8420.69043 || 8504.639648 || 7987.080078 || 7997.279785 || 7997.279785 || 350470000 || -5.1%
 +
|-
 +
| 11/20/2008 || 7995.529785 || 8187.399902 || 7506.970215 || 7552.290039 || 7552.290039 || 528130000 || -5.6%
 +
|-
 +
| 12/1/2008 || 8826.889648 || 8827.049805 || 8141.359863 || 8149.089844 || 8149.089844 || 321010000 || -7.7%
 +
|-
 +
| 8/8/2011 || 11433.92969 || 11434.08984 || 10809.84961 || 10809.84961 || 10809.84961 || 479980000 || -5.5%
 +
|-
 +
| 3/9/2020 || 24992.35938 || 24992.35938 || 23706.07031 || 23851.01953 || 23851.01953 || 750430000 || -7.8%
 +
|-
 +
| 3/11/2020 || 24604.63086 || 24604.63086 || 23328.32031 || 23553.2207 || 23553.2207 || 663960000 || -5.9%
 +
|-
 +
| 3/12/2020 || 22184.71094 || 22837.94922 || 21154.46094 || 21200.61914 || 21200.61914 || 908260000 || -10.0%
 +
|-
 +
| 3/16/2020 || 20917.5293 || 21768.2793 || 20116.46094 || 20188.51953 || 20188.51953 || 770130000 || -12.9%
 +
|-
 +
| 3/18/2020 || 20188.68945 || 20489.33008 || 18917.46094 || 19898.91992 || 19898.91992 || 871360000 || -6.3%
 +
|-
 +
| 6/11/2020 || 26282.50977 || 26294.08008 || 25082.7207 || 25128.16992 || 25128.16992 || 647780000 || -6.9%
 +
|}
 +
 +
Grouping them using 6-month windows gives 9 crashes:
 +
*1987/1988: 3 obs (including largest)
 +
*1989: 1 obs
 +
*1997: 1 obs
 +
*1998: 1 obs
 +
*2000: 1 obs
 +
*2001: 1 obs
 +
*2008: 9 obs
 +
*2011: 1 obs
 +
*2020: 6 obs (and counting, including second and third largest)

Revision as of 15:55, 24 July 2020

Summary

Between the 19th of February, 2020, and the 23rd of March, 2020, the S&P500 (^GSPC) fell from 3,386.15 to 2,237.40, using adjusted closing prices. It subsequently climbed back to 3,276.02 on the 22nd of July, 2020. Some people seem to think it will keep going. I expect a massive crash.

To predict the upcoming (?) 2020 stock market crash, I propose examining the market using three techniques:

  • Historical crash analysis
  • Price-to-earnings (or revenue, etc.) analysis that attempts to factor defaults
  • Extrapolating based on the market-to-economy relationship

I could also employ a pure chartist approach, perhaps to give the counterfactual.

S&P 500 data

As much as I love the Dow, it accounts for about 25% of the economy, whereas the S&P500 accounts for around 80%. So I'll likely use the S&P500. I'll download both from Yahoo:

COMPUSTAT data

COMPUSTAT updates its fundamentals quarterly and monthly security files daily. I did a pull of the entire fundamentals quarterly database from 2015-01 to 2020-07. It has close prices, as well as highs and lows. I pulled close, as averaging highs and lows seems like it might be skewed given the context (especially over short time periods).

Historic Crashes

Data before the 1980s probably isn't useful. It was a different world back then, both in terms of globalization and in terms of how stock markets worked. So, I'll start with the 1987 crash and go forward from there. I'm going to suggest three classes of crash, like hurricanes:

Class Description
1 Flash crashes and other short-term market anomalies
2 Short to medium term economic disturbances that are limited to a sector
3 Economic crisis

My starting list comes from a list of stock market crashes.

Using the largest decline on the Dow of the period as the crash day gives:


Data driven approach

Identify crashes as using the largest single-day declines on the DJIA:

Date Open High Low Close Adj Close Volume SingleDayChange
10/19/1987 2046.670044 2164.159912 1677.550049 1738.73999 1738.73999 87230000 -22.6%
10/26/1987 1864.219971 1881.800049 1774.040039 1793.930054 1793.930054 35420000 -8.0%
1/8/1988 2046.579956 2058.689941 1898.040039 1911.310059 1911.310059 27440000 -6.9%
10/13/1989 2753.280029 2773.360107 2545.48999 2569.26001 2569.26001 37620000 -6.9%
10/27/1997 7714.399902 7714.419922 7159.919922 7161.200195 7161.200195 91830000 -7.2%
8/31/1998 8052.450195 8095.450195 7539.069824 7539.069824 7539.069824 117890000 -6.4%
4/14/2000 10922.84961 10922.84961 10201.53027 10305.76953 10305.76953 267580000 -5.7%
9/17/2001 9580.320313 9580.320313 8883.400391 8920.700195 8920.700195 565600000 -7.1%
9/29/2008 11139.62012 11139.94043 10365.4502 10365.4502 10365.4502 385940000 -7.0%
10/7/2008 9955.419922 10124.03027 9436.669922 9447.110352 9447.110352 362520000 -5.1%
10/9/2008 9261.69043 9448.139648 8579.19043 8579.19043 8579.19043 436740000 -7.3%
10/15/2008 9301.910156 9308.759766 8530.120117 8577.910156 8577.910156 374350000 -7.9%
10/22/2008 9027.839844 9027.839844 8335.299805 8519.209961 8519.209961 348840000 -5.7%
11/5/2008 9616.599609 9616.599609 9111.469727 9139.269531 9139.269531 264640000 -5.0%
11/19/2008 8420.69043 8504.639648 7987.080078 7997.279785 7997.279785 350470000 -5.1%
11/20/2008 7995.529785 8187.399902 7506.970215 7552.290039 7552.290039 528130000 -5.6%
12/1/2008 8826.889648 8827.049805 8141.359863 8149.089844 8149.089844 321010000 -7.7%
8/8/2011 11433.92969 11434.08984 10809.84961 10809.84961 10809.84961 479980000 -5.5%
3/9/2020 24992.35938 24992.35938 23706.07031 23851.01953 23851.01953 750430000 -7.8%
3/11/2020 24604.63086 24604.63086 23328.32031 23553.2207 23553.2207 663960000 -5.9%
3/12/2020 22184.71094 22837.94922 21154.46094 21200.61914 21200.61914 908260000 -10.0%
3/16/2020 20917.5293 21768.2793 20116.46094 20188.51953 20188.51953 770130000 -12.9%
3/18/2020 20188.68945 20489.33008 18917.46094 19898.91992 19898.91992 871360000 -6.3%
6/11/2020 26282.50977 26294.08008 25082.7207 25128.16992 25128.16992 647780000 -6.9%

Grouping them using 6-month windows gives 9 crashes:

  • 1987/1988: 3 obs (including largest)
  • 1989: 1 obs
  • 1997: 1 obs
  • 1998: 1 obs
  • 2000: 1 obs
  • 2001: 1 obs
  • 2008: 9 obs
  • 2011: 1 obs
  • 2020: 6 obs (and counting, including second and third largest)
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