Probability of a US stock market crash is below-average according to “froth forecasts”

A piece in Dow Jones / Markt Watch (gated).

“Froth forecasts” compiled by State Street Associates (based on research by Harvard University professor Robin Greenwood):

• probability of a 40% decline at some point over the next two years — the operational definition of a crash that they use — is calculated to be 18%, lower than the trailing five-year average of forecasted probabilities of 26%.
• crash probabilities are a function of the U.S. stock market’s performance over the past two years. As past performance increases, so does the probability of a subsequent crash. When the trailing two-year price runup is 100%, for example, the probability of a subsequent crash is close to 50%. When the trailing price-runup is 150%, “a crash is nearly certain.”

Here is the link for more if you can access it

This article was written by Eamonn Sheridan at www.forexlive.com.