why does price tend to fall faster than it rises?

Quote from ElectricSavant:

How does the uptick rule distort this even further...?

I am just winging it here...

ES
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Did? Does? Are we back to using it? I thought we got rid of it. The studies in the CFA curriculum show that the uptick rule actually produces more volatility than when it's not used.
 
I was just curious....I would not doubt that some sort of market intervention is on our horizon AGAIN...

You can't throw a ball up in the air and keep it up there forever...

ES

Quote from bwolinsky:

Did? Does? Are we back to using it? I thought we got rid of it. The studies in the CFA curriculum show that the uptick rule actually produces more volatility than when it's not used.
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Quote from bwolinsky:

Herd behaviour isn't always so symmetrical. It's not always going to lead to bear markets, but everything about this thread just shows how uneducated the masses are about our markets.

This is due to price weighting. The observation not so much in stocks, but in index components.
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Lessee if ah gets this: if what you're saying is correct, puts and calls on a non-index component should not demonstrate the curvy smily thingie that puts and calls have on an index component, correct? If so, please offer two contrasting examples of same.
 
Quote from trefoil:

Lessee if ah gets this: if what you're saying is correct, puts and calls on a non-index component should not demonstrate the curvy smily thingie that puts and calls have on an index component, correct? If so, please offer two contrasting examples of same.
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This has nothing to do with that. The smile not the volatility is the main concern of the options contract. Price weighted indexes do have downward bias, and that is all I'm saying.
 
So index components, as in the stocks that make up the indexes, don't exhibit this downward bias, but indexes - price-weighted indexes - do?
 
The over market sentiment the last few weeks has been BEARISH bcuz of the weakening economy, and thats why you see bigger red bars lately,..end of story.
 
I don't buy that idea that bwolinsky is selling. I don't understand it, either.

Again, I'm arguing that in a bull market most of the news is expected to be good so any surprise to the upside is on average not going to be as large as a surprise to the downside. It is an artifact of linear regression extrapolations.
 
Quote from Lucias:

I don't buy that idea that bwolinsky is selling. I don't understand it, either.

Again, I'm arguing that in a bull market most of the news is expected to be good so any surprise to the upside is on average not going to be as large as a surprise to the downside. It is an artifact of linear regression extrapolations.
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Buy it or not, that's a mathematical thing.

An example is a two stock index, 1 for $10 per share, and 1 for $100 per share. Assume that sharesunderstanding is equal 1 for the $10 stock and 2 shares for the $100 stock.

The price weighted index and value weighted index will both start with a baseline value of 1

So our index (10+100)/2=55 and our value is also the same (10+200)/2=105

Now, move both prices in the indexes up 1% and see the change.

(10.10+101)/2=55.55/55-1=1% as expected
(10.1+202)=212.1/105-1=2%

If the difference isn't obvious it should be. You have the price weighted index less on the same move in the value weighted one. The value weighted version goes up by 2% because the value of the two shares of $100 per share increased by $1 increasing the value of the index by about 2%.

It is an average mathematical result to keep going down this line of thought and you'll find that price weighted indexes exhibit downward bias. If it's not obvious by this example I don't think another would help, but if you have questions....
 
So then why does the S&P and Dow basically move hand in hand when they have different versions of index calculations?

Of course 1 moves a slightly greater amount than the other depending on that particular day's news and subsequent components price action.
 
Quote from SunTrader:

So then why does the S&P and Dow basically move hand in hand when they have different versions of index calculations?

Of course 1 moves a slightly greater amount than the other depending on that particular day's news and subsequent components price action.
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It's not that it is a slightly greater amount but that it is ALWAYS A GREATER amount. No matter what, always.
 
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