It is being reported widely that the drop in the Nikkei on Friday is the largest since the 1987 crash. In absolute terms this is true – in relative terms it is nonsense. If you work in a field outside of finance that uses risk as a measure then you will understand the distinction between relative and absolute. This distinction is no less relevant in finance as is an understanding that absolute is meaningless whereas relative carries a lot of information.
Below is a list of relative moves on the Nikkei that are larger than the fall on Friday.
You can see that Friday’s move ( the last on the list) is not that impressive compared to others. I would be much more concerned about a double digit loss from the current level of the index.
