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NEW IDEAS IN FINANCIAL MODELING FOR EQUITY MARKET VOLATILITY


GLOBAL EQUITY MARKET VOLATILITY IN RESPONSE TO EFFECTS OF BOTH CYCLES AND ELEMENTS OF VARIOUS DOMESTIC CONGRESSIONAL AND ECONOMIC EVENTS AND ISSUES

In my web blogs I have touched on a variety of serious global and domestic issues; mainly financial markets, investing, geo-politics, international affairs, health care, economics and trends. It is often necessary to discuss politics as it relates to these issues to effectively discuss them in proper detail and to attempt to discuss the consequences of various high level decision made regarding these topics. I try to be as neutral as possible with any views I may have on any particular issue and only discuss politics and it’s influence on these issues as it directly relates to what is being immediately discussed. I realize politics can and often is a ‘ hot button ‘ issue and I try to be very cognizant of that as I discuss various matters.

So … now that this issue has hopefully been clarified a bit … guess what I am focusing on is this blog’s discussion ?? … Anyone ? … Yep, it’s politics; specifically in regards to developing a more accurate, precise and comprehensive predictive financial model to better cope with the increase in global financial market volatility. Here we go. I will try to make this short and sweet and simple.

The Congressional Effect is a stock market phenomenon where, it is argued, stock prices and market volatility have a correlation with the ‘ in session ‘ schedules of the United States Congress. Eric T. Singer, a New York based finance professional and mutual fund manager coined the phrase in an article in BARRONS on March 2, 1992. Most recently, in 2006, the academic collaborative team of Michael F. Ferguson ( College of Business, Finance Professor at my Alma Mater, the University of Cincinnati ) and H. Douglas Witte studied and published further research and findings regarding ‘ The Congressional Effect.’

With all due respect and deference to Misters: Singer, Ferguson and Witte, I believe this Congressional Effect predictive model theory can be taken a step further to provide more precise & accurate functional data and conclusions by including 3 other factors besides the domestic congressional schedule as it correlates to equity market volatility. These factors include the following: the current status of the current economic business life cycle, available polling data regarding domestic approval ratings of Congress from both the public electorate and the business sector, and lastly, the relative time until the next Congressional elections. I believe that politicians, especially incumbents of any political affiliation are generally more concerned with their approval ratings and the domestic economy when their jobs are on the line and as they near re-election. You know, politicians need jobs too.

I would venture to assume ( and yes, I’m aware of what happens when people assume things ) that with the exponential increase in functional data over the last 2-5 years, along the the constant development and progress of predictive analytics software, it may well be possible to extrapolate more data-based conclusions from more diverse sources and develop a more accurate and precise financial predictive model that can be used in this new, post Great Recession, integrated global financial market to better predict and cope with global equity market volatility.

We’ll see what happens. I hope everyone has a nice 4th of July holiday weekend; even all of you members of Congress; who are in recess from July 5th until July 11th.

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About Neven's Blog

My blog focuses on FINANCIAL MARKET ANALYSIS & INSIGHT from a macro as well as a micro - level point of view. The information is straight forward, honest, simplifies complex matters, questions some oversimplified matters, all while being as easy as possible for readers to understand. I primarily focus on capital and currency markets by combining insights, analysis & ideas from the fields of finance, economics and geopolitics.

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