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St. Louis Financial Stress Index (STLFSI)

InvestorInvestor
edited April 2012 in Off-Topic
St. Louis Fed publishes a Financial Stress index. I've become familiar with this blog.

It indicates the stress in financial institutions. I though you might be interested. I now try to keep an eye on this. Updated weekly (a lag of 1 week)

http://research.stlouisfed.org/fred2/series/STLFSI

image

The author of blog Jeff Miller says:

"This is an excellent tool for managing risk objectively, and it has suggested the need for more caution. Before implementing this indicator our team did extensive research, discovering a "warning range" that deserves respect. We identified a reading of 1.1 or higher as a place to consider reducing positions."

Comments

  • Sven
    It appears to track VIX shown below.

    http://www.marketwatch.com/investing/index/vix

  • InvestorInvestor
    Reply to @Sven: It does indeed look similar on the long term chart but that is expected that VIX will increase as risk and uncertainty will be reflected in futures and volatility will increase.

    VIX is obviously reactive but values are daily but very volatile.

    STLFSI is weekly with a one week lag and less volatile.

    The author has identified STLFSI value of 1.1 as a point of concern. Some people use VIX value of 25 as a similar measure but daily volatility of VIX may make it more difficult.
  • Sven
    Reply to @Investor: Still learning on reading these data. This week VIX has moved up to 19.6 from 14.8 at several weeks ago. The mean is at 20.5 for the past decade.

    By the way, when does STLFSI publish their later data?

    thanks
  • InvestorInvestor
    edited April 2012
    Reply to @Sven: If you visit the site at the URL on the left there are recent observations (with a 1 week lag) and you can download all the data. You can even be notified of updates.
  • Sven
    Reply to @Investor: Thank you. How would you use the data to guide your investment?
  • InvestorInvestor
    Reply to @Sven: Use a level of the index to reduce risk exposure.

    The blogger professor has identified a reading of 1.1
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