Canterbury Market Update


A Market Update From Canterbury Investment Management is now Available

Volatility Visualized

This update will focus on putting volatility into perspective.  When volatility is discussed, there are many ways in which volatility is defined.  Our readers know that at Canterbury, we measure volatility using the Canterbury Volatility Index (CVI).  Another helpful way to visualize volatility in the markets is the use of “outlier days.”

Several of our updates talk about outlier days, and we have written additional pieces on them in the past, but we wanted to share a few quick charts that show outlier days in a bull market and in a bear market.

To start, let’s define an outlier day.  Canterbury defines an outlier day on the market (S&P 500) to be any single trading day beyond +/-1.50%.  We arrive at this definition by taking the standard deviation of the S&P 500 during a Canterbury Bullish Market State, dating back to 1950.  The daily standard deviation in a Bull Market State is 0.75%.  Using bell curve math, that would mean that 95/100 trading days should fall between -1.50% to +1.50%.  That would mean for a given year, about 13 trading days would be beyond +/-1.50%.