TeslaEducation
Editors' picks
The very Fat tail of the Market!
Updated
The trading value of the 5078 stock tickers traded in the 6088 billion USD.
Hence, the trading value of the top 10 tickers with the highest dollar value of trading was 1811 billion USD, almost 29.75% of all circulated dollars in the market.
The fact that the top 10 tickers account for almost 29.75% of all trading value is a sign of market inefficiency. This suggests that the market is skewed towards a few large tickers. This can lead to increased risk for investors who are trying to exploit market inefficiencies.
The top 10 tickers were:
TSLA: Accounts for more than 7.2% of all trades, 10.3% of S&P500 trades, and 18.98% of NASDAQ100
NVDA: Accounts for more than 6.8% of all trades, 10.3% of S&P500 trades, and 15.27% of NASDAQ100
AAPL
MSFT
AMZN
META
AMD
BRK.A
NFLX
GOOG
The top 10 tickers account for 70.55% of all trading value of tickers on the NASDAQ 100..!
The top 10 tickers account for 38.54% of all trading value of tickers on the S&P500..!
The S&P 500 and NASDAQ 100 are both broad market indices that track the performance of the 500 largest publicly traded companies in the United States and the 100 largest non-financial companies listed on the Nasdaq stock exchange, respectively. These indices are widely used by investors as benchmarks for their portfolios.
However, the fact that the top 10 tickers account for such a large share of trading value suggests that these indices may not be as representative of the overall market as they once were. This is because the performance of the top 10 tickers can have a disproportionate impact on the performance of the S&P 500 and NASDAQ 100.
The high kurtosis in the distribution of trading values also suggests that the S&P 500 and NASDAQ 100 may not be as good at capturing the full range of risk and return potential in the market. This is because the distribution of trading values is skewed towards a few large tickers. This means that there is a greater potential for large losses in the S&P 500 and NASDAQ 100 than would be suggested by their average returns.
As a result of these factors, the S&P 500 and NASDAQ 100 may be less useful for investors who are looking for a diversified portfolio that is representative of the overall market and that has a low risk of large losses.
Implications
The fact that the top 10 tickers had such a significant impact on the overall trading dollar value has a few implications.
1st: it means that investors who focus on investing in the top 10 tickers are more likely to generate higher returns than investors who invest in a wider range of tickers.
2nd: it means that regulators need to be aware of the potential for market manipulation by investors who have large holdings in the top 10 tickers.
3rd: it means that investors need to be careful not to over-concentrate their portfolios in the top 10 tickers, as this could make them more vulnerable to losses if the performance of these tickers deteriorates.
4th: The correlation between the tickers and indexes may be overstated. This is because the performance of the top 10 tickers has a disproportionate impact on the performance of the indexes. As a result, the correlation between the tickers and indexes may not be representative of the correlation between the individual tickers.
5th: The correlation between the tickers and indexes may be less informative. This is because the correlation between the tickers and indexes does not provide any information about the specific relationships between the individual tickers. For example, the correlation between the tickers and indexes does not tell us whether the individual tickers are moving in the same direction or in opposite directions.
Conclusion:
Even among the top 10 tickers, TSLA and NVDA have dragged too much attention from most market participants, and the Future of the market is very dependent on the future movements of these 2 tickers!
https://www.tradingview.com/x/gzmauv1S/
Education:
A fat tail in statistics is a feature of a distribution where the tails of the distribution are thicker than those of a normal distribution. This means that there are more extreme values in the distribution than would be expected under a normal distribution.
Hence, the trading value of the top 10 tickers with the highest dollar value of trading was 1811 billion USD, almost 29.75% of all circulated dollars in the market.
The fact that the top 10 tickers account for almost 29.75% of all trading value is a sign of market inefficiency. This suggests that the market is skewed towards a few large tickers. This can lead to increased risk for investors who are trying to exploit market inefficiencies.
The top 10 tickers were:
TSLA: Accounts for more than 7.2% of all trades, 10.3% of S&P500 trades, and 18.98% of NASDAQ100
NVDA: Accounts for more than 6.8% of all trades, 10.3% of S&P500 trades, and 15.27% of NASDAQ100
AAPL
MSFT
AMZN
META
AMD
BRK.A
NFLX
GOOG
The top 10 tickers account for 70.55% of all trading value of tickers on the NASDAQ 100..!
The top 10 tickers account for 38.54% of all trading value of tickers on the S&P500..!
The S&P 500 and NASDAQ 100 are both broad market indices that track the performance of the 500 largest publicly traded companies in the United States and the 100 largest non-financial companies listed on the Nasdaq stock exchange, respectively. These indices are widely used by investors as benchmarks for their portfolios.
However, the fact that the top 10 tickers account for such a large share of trading value suggests that these indices may not be as representative of the overall market as they once were. This is because the performance of the top 10 tickers can have a disproportionate impact on the performance of the S&P 500 and NASDAQ 100.
The high kurtosis in the distribution of trading values also suggests that the S&P 500 and NASDAQ 100 may not be as good at capturing the full range of risk and return potential in the market. This is because the distribution of trading values is skewed towards a few large tickers. This means that there is a greater potential for large losses in the S&P 500 and NASDAQ 100 than would be suggested by their average returns.
As a result of these factors, the S&P 500 and NASDAQ 100 may be less useful for investors who are looking for a diversified portfolio that is representative of the overall market and that has a low risk of large losses.
Implications
The fact that the top 10 tickers had such a significant impact on the overall trading dollar value has a few implications.
1st: it means that investors who focus on investing in the top 10 tickers are more likely to generate higher returns than investors who invest in a wider range of tickers.
2nd: it means that regulators need to be aware of the potential for market manipulation by investors who have large holdings in the top 10 tickers.
3rd: it means that investors need to be careful not to over-concentrate their portfolios in the top 10 tickers, as this could make them more vulnerable to losses if the performance of these tickers deteriorates.
4th: The correlation between the tickers and indexes may be overstated. This is because the performance of the top 10 tickers has a disproportionate impact on the performance of the indexes. As a result, the correlation between the tickers and indexes may not be representative of the correlation between the individual tickers.
5th: The correlation between the tickers and indexes may be less informative. This is because the correlation between the tickers and indexes does not provide any information about the specific relationships between the individual tickers. For example, the correlation between the tickers and indexes does not tell us whether the individual tickers are moving in the same direction or in opposite directions.
Conclusion:
Even among the top 10 tickers, TSLA and NVDA have dragged too much attention from most market participants, and the Future of the market is very dependent on the future movements of these 2 tickers!
https://www.tradingview.com/x/gzmauv1S/
Education:
A fat tail in statistics is a feature of a distribution where the tails of the distribution are thicker than those of a normal distribution. This means that there are more extreme values in the distribution than would be expected under a normal distribution.
Note
I published this article to show changes in major indexes are secondary to these 10, and the other 98% in SPX or 90% in NDX are almost irrelevant! In other words, while these tickers have a significant positive correlation with indexes, other tickers do not have such a relationship necessarily..!
All the information you need to make an informed decision for free in the next 3 weeks: docs.google.com/spreadsheets/d/11cFXkX6bPFslJzkQxtLJKDNWZQhpaBvuoZvDiFonZuc/edit?usp=sharing
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