[R-SIG-Finance] corrections vs drawdowns

[Brian G. Peterson]

Alec,

I suspect that you may wish to start with setting geometric=FALSE in
your call to findDrawdowns.

Corrections are usually defined as a peak to trough difference in
*price*, as a percentage of the peak price.

So I think you do not want to compound the *returns* in calculating
your drawdowns.

Regards,

Brian

-- 
Brian G. Peterson
http://braverock.com/brian/
Ph: 773-459-4973
IM: bgpbraverock

On Tue, 2019-01-08 at 16:09 +0000, Alec Schmidt wrote:
> I tried to use the function findDrawdowns() to compile NASDAQ (^IXIC)
> corrections. For the sample starting on
> 
> 2007-01-01, I get the following start -to-trough periods with
> drawdowns higher than 10%
> 
> 08/30/2018 - 12/24/2018 (-23.64%) [80 Days]
> 07/21/2015 - 02/11/2016 (-18.24%) [143 Days]
> 09/17/2012 - 11/15/2012 (-10.90%) [42 Days]
> 03/27/2012 - 06/01/2012 (-12.01%) [47 Days]
> 05/02/2011 - 10/03/2011 (-18.71%) [108 Days]
> 11/01/2007 - 03/09/2009 (-55.63%) [339 Days]
> 
> 
> However, if the sample starts on 2000-06-01, I get
> 08/30/2018 - 12/24/2018 (-23.64%) [80 Days]
> 07/21/2015 - 02/11/2016 (-18.24%) [143 Days]
> 07/18/2000 - 10/09/2002 (-73.94%) [559 Days]
> 
> i.e. no bear market of 2008...
> 
> This is because ^IXIC didn't recover in 2007 from its fall from top
> in 2000. This implies that various reports on market corrections do
> not use the max drawdown. Is there consensus (and possibly R scripts)
> that address this problem?
> 
> Thanks! Alec
> 
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