Warning! Finra Arbitration Filings Down, S&P 500 Up



Jack Duval of Original forensic analysis + visualization points out the inverse correlation between FINRA arbitrations and market peaks:

“[Above] is a visualization of annual Finra Arbitration Filings as compared to the S&P 500 annual closing value. Since 1999, there is a significant negative correlation of -0.594 between the two. When arbitration filings have peaked it has been a buy signal, and vice versa.

On the lower pane of the viz, I have plotted the annual Finra Arbitration Filings and colored the marks by the number of claims involving suitability. Clearly, as suitability claims have waned, the market has topped out. (Note the 2012 data is through September.)”

It looks to be a cycle that accidentally relies on mean times between market peaks, and an attenuating number of new arbs filed by disgruntled customers. Regardless, its an unusual indicator and one worth watching.

Jack blogs at ofav.pro/blog/.

Warning! Finra Arbitration Filings Down, S&P 500 Up
Jack Duval
Original forensic analysis + visualization October 17th, 2012 

Category: Contrary Indicators, Legal

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3 Responses to “Are FINRA Arbitration Filings a Contrary Indicator?”

  1. lburgler says:

    Not a leading indicator, though, right?

  2. AHodge says:

    it looks to be a lagging contrary indicaor

    logically speaking-without reference to any facts
    they file when they have losses
    they have more losses and fraud is exposed
    when the market goes down

  3. ben22 says:

    wow, always wondered if this was the case and now we get some data on

    great find BR

    I’ve noticed that post 08 crisis there are a few products that have become wildly popular with reps, normally include a “story” behind them that helped get them through the 2008 crisis…..and just so happen to usually have some good comp rips for the reps…imagine that

    structured products and some sort of promised income stream annuities come to mind….I might still throw some REITS in this mix as well, private REITS, not a traded REIT.

    next spike in claims 2015-2017….my best guess

    all that said, I’m a little bit surprised that there is such a large deviation between post tech bubble and post credit crisis

    less people willing to go to arbitration over AIG/Lehman/Bear stock recs than a pets.com?