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
Devs
bell interior prob.
tail probability
odds
1
0.84134474607
0.317310508
3.151
2
0.97724986805
0.045500264
21.978
3
0.99865010197
0.002699796
370.398
4
0.99996832876
6.33425E-05
15,787
5
0.99999971335
5.73303E-07
1,744,278
6
0.99999999901
1.97318E-09
506,797,317
