Risks of the U.S. stock market from 1871

Data from Robert Shiller’s website: http://www.econ.yale.edu/~shiller/data/ie_data.xls

The logarithmic returns were used in the calculation:
Skewness: -0.364
Excess Kurtosis (compared to a normal distribution): 11.224
5% VaR: -6.058%
Annualized Volatility: 14.096%

First, there is a clear long-term decline in skewness.

Second, excluding the Great Depression, kurtosis and volatility are also on a long-term rise and 5% VAR is also becoming worse.

Third, it is therefore evident that more advanced financial technologies have increased, not decreased, risks.

Fourth, in addition to kurtosis, this is even more evident in U.S. house price trends (monthly data is only available after 1953).

To summarize: perhaps this is why cryptocurrencies represent the future, as they are more predatory, destructive and manipulative financial instruments

Commodity: Volatility and 5% VAR declined, but skewness and kurtosis worsened.

This may be due to the fact that early commodity futures were more reliant on more seasonal agricultural and livestock products and therefore had higher volatility and a 5% VAR. Later commodity futures were more reliant on industrial metals, precious metals, and energy, and therefore were more exposed to economic growth shocks which have low skewness and high kurtosis.

But the reason could also be or include a similar situation for economic growth itself: volatility/5% VAR improves while skewness/kurtosis worsens.



In sum, the general rule is that economic and financial risks are rising, not falling, as financial and monetary policy technologies advance. This is consistent with the perception of populism, but not with the common sense that the academics and business tell us. This suggests that the deterioration of the risk indicator is not a bug, it is a feature