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From
Bill Murphy’s Lemetropolecafe.com “Midas commentary” on
Friday, Sept. 30, 2011:
HSBC has published an
interesting study of the recent precious metal volatility:
"Based on almost 40
years of data, the drop in gold prices last week represented a 3 standard
deviation move, down 8.54%. According to the data, this has occurred only
seven times since gold became freely convertible in 1972. This made the week
ended 23 September the seventh-worst week in terms of percentage price
performance in almost 40 years of trading, or more than 2,000 weeks.
The last time volatility
was this high was in the week ended 21 March 2008, when Bear Stearns
collapsed. To find higher weekly volatility levels,we have to go back to the
first week of March 1983, when gold prices dropped more than 11%...
Based on 41 years of
data, the drop in silver prices last week represented a 5 standard deviation
move, falling 23.42% for week ended 23 September. According to the data,
declines of this magnitude are rare and have occurred only four times since
1970"
I
was so taken with the news that HSBC is reporting that silver’s most
recent fall in price was a 5 std. deviation move – I asked good friend
and resident Ph.D. [Dr. Jim Willie] in statistics what the odds are of a 5
standard deviation move.
His
Reply:
ANSWER : 1 in 1.744
million
any questions, just ask
/ jim
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Devs
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bell interior prob.
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tail probability
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odds
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1
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0.84134474607
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0.317310508
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3.151
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2
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0.97724986805
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0.045500264
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21.978
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3
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0.99865010197
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0.002699796
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370.398
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4
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0.99996832876
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6.33425E-05
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15,787
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5
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0.99999971335
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5.73303E-07
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1,744,278
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6
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0.99999999901
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1.97318E-09
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506,797,317
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