Kass: Why a 25% Drop Isn't Out of the Question
The S&P/LSTA Leveraged Loan Index was established 10 years ago. Its monthly return over the 127 months has averaged 0.42%, with a standard deviation of 0.63%. So July's loss of 3.35% was over six standard deviations from the average. The largest monthly move prior to July was a loss of 1.51% in September 2001; this was 3.6 standard deviations from the average return.
Let's put the Loan Index's move into an equity perspective over the same 10.5 years and calculate what a six-sigma event would mean for equities.
Since 1997, equities have produced an average monthly return of 0.79%, with a standard deviation of 4.36%. There has never been a six-sigma event in that time frame. The largest monthly price change was a 14.5% loss in August 1998 (during Long Term Capital Management's demise); this represented over 4 standard deviations from average returns.
- Loading Comments...
- Loading Comments...
Featured Photo Galleries
| Dow Jones | S&P 500 | NASDAQ | 10-Year Note | |
|---|---|---|---|---|
| 10,197.47 | 1,087.24 | 2,149.02 | 34.46 |
Oil *
75.99
|
|
DOWN
93.79
|
DOWN
11.27
|
DOWN
17.88
|
DOWN
0.28
|
10 Yr
3.45%
SPDR Gold
108.21
|
|
-0.91%
|
-1.03%
|
-0.83%
|
-0.81%
|
Data delayed 20 minutes |














