[R-SIG-Finance] corrections vs drawdowns

[Alec Schmidt]

Thank you Brian,

geometric=FALSE gave me additional corrections in 2011 and 2012 but still no bear market of 2008:



08/30/2018 - 12/24/2018 (-11.04%) [80 Days]
07/21/2015 - 02/11/2016 (-10.05%) [143 Days]
09/17/2012 - 11/15/2012 (-8.42%) [42 Days]
03/27/2012 - 06/01/2012 (-9.44%) [47 Days]
07/08/2011 - 08/19/2011 (-15.96%) [31 Days]
05/02/2011 - 06/17/2011 (-7.59%) [34 Days]
02/22/2011 - 03/16/2011 (-6.54%) [17 Days]
07/18/2000 - 10/09/2002 (-97.34%) [559 Days]


Alec



________________________________
From: Brian G. Peterson <brian using braverock.com>
Sent: Tuesday, January 8, 2019 11:17 AM
To: Alec Schmidt; r-sig-finance using r-project.org
Subject: Re: [R-SIG-Finance] corrections vs drawdowns

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

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Brian G. Peterson
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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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