Camomille’s strategy is based on the sell-off, consolidation and recovery pattern of markets with each stage taking approximately a month. A question we are regularly asked is whether technology, high frequency trading or QE have impacted the speed of recovery.
Using the 14 global equity indices we include in our model and data from 1980 to 2014, we have studied how long it takes for markets to recover following a sell-off (typically being a fall of between 5% and 10%).
How many markets recover in two or three months?
First of all we looked at what percentage of markets recover to the level of the prior peak by our buy and sell dates (being on average two and three months after the fall).
For both series, recovery time has remained consistent, with an average of 38% of markets recovering within two months and 54% recovering within three months.
Stability of recovery days
Next we looked at the stability of the recovery days over time. The graph below shows the average recovery days of those markets that did so by our buy and sell dates.
Once again there is no significant trend since 1980 in recovery days, despite various technological advancements, development of high frequency trading and the introduction of QE.
Evolution of recoveries
On average 54% of markets recovered within three months varying between 40% and 65% depending on the time period. Significantly there is no trend over time to this pattern.
In conclusion we have established that recoveries over the two and three month time periods have been consistent since 1980 with no evidence of a trend change, and as such there is no evidence that technology, HFT or QE has had any impact on these recovery times.
Should you require more detailed analysis where we expand our recovery parameters, include the 1970’s and split results regionally we would be pleased to provide. Please email email@example.com.