Equity markets are expected to go down by 30% every 7 years

Discussion in 'SP9' started by Edwin, Jul 8, 2015.

  1. Edwin

    Edwin Member

    Hi all,

    I saw this statement in a past ST9 paper and I would like to verify it if possible to use it in my stress testing of a portfolio with guarantees.

    The specimen 2010 paper solution to question 5 (i) reads;-

    "In rough terms share prices generally collapse by say 30% every 7 years or so before eventually recovering ground."

    Don't talk about why I ddn't use it in my past April 15 exam...lol
     
  2. Oxymoron

    Oxymoron Ton up Member

    The economic cycle lasts about 8 years in developed countries. The statement otherwise is a gross generalization.
     
  3. Edwin

    Edwin Member

    Thanks Ox
     
  4. Simon James

    Simon James ActEd Tutor Staff Member

    Well the last crash was in 2008 and in 2015 we have just seen a 10%+ decline in markets due to jitters over China - perhaps they are on to something? Maybe we need to wait until 2022 to see if this "pattern" continues!
     
  5. Edwin

    Edwin Member

    Thanks Simon, let's wait and see...lol
     

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