In 2010, President Obama signed The Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires financially based government agencies and 35 major US banks to monitor systemic risk. This was in response to the recent near financial collapse due to major mistakes made by organizations generally considered "too big to fail". Systemic risk is the risk of the collapse of an entire financial system or market. It refers to the risks imposed by interdependencies in a system or market, where the failure of a single entity or cluster of entities can cause a cascading failure. In April 2011, the Global Financial Stability Report, written by the International Monetary Fund, stated that Exchange Traded Funds (ETFs) could cause financial stability risks if prices were to decline for an extended time. In order to monitor systemic risk, daily historical ETF price data was collected for 1172 ETFs dating back to 1993. Using the programming language R, percent returns on that data were calculated for one, three, five, and ten days in the future for every date. Also using R, linear and quadratic regression analysis was done on the ETF prices and percent returns in three and five day increments. The slopes of the regression lines, prices, and percent returns will be analyzed to see if they correlate in the hope of finding short term patterns that may predict what occurs next. A program called the Anomalator, which analyzes typical patterns and detects atypical occurrences worthy of inspection, will be used with the datasets created to potentially detect problems in the financial market before they happen.


Categorical Data Analysis


Brett Amidan

Lab site

Pacific Northwest National Laboratory (PNNL)

Funding Acknowledgement

This material is based upon work supported by the S.D. Bechtel, Jr. Foundation and by the National Science Foundation under Grant No. 0952013. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of the S.D. Bechtel, Jr. Foundation or the National Science Foundation. This project has also been made possible with support of the National Marine Sanctuary Foundation. The STAR program is administered by the Cal Poly Center for Excellence in Science and Mathematics Education (CESaME) on behalf of the California State University (CSU).



URL: https://digitalcommons.calpoly.edu/star/211


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