80 Years of Daily S&P 500 Value-at-Risk Estimates
And the last 10 years…
Update: Felix has updated his post with a link to my charts above, but makes some comments that I thought I should address.
If we use a shorter horizon that better captures what is going on at this moment, we see that risk plateaued in June and has actually ticked up significantly in the past several weeks as measured via the “stable” distribution. On the other hand, volatility has actually decreased during the past several weeks. What this means, i.e. the discrepancy between “stable” and “normal” is that the tails have become fatter recently.
Also keep in mind that although risk appears to have decreased since the beginning of the year, it is still at extremely high levels. We would have to go back to 1934 to see comparable risk levels, so it is no time to become complacent.