SP 500 Price Change Frequency Distributions
Source: http://feedproxy.google.com/~r/qvmgroup/yrMF/~3/Xy_c-O6e0QI/6515Posted on Thursday, October 22nd, 2009 | In China, Developed Markets, Investing Lessons, Market Commentary
This article presents the shape of the price change frequency distribution for the S&P 500 over approximately six decades on a daily basis, monthly basis and calendar year basis.
The degree of “normality” of S&P 500 price changes is high on a daily basis — it’s visually symmetrical. The average change of 0.03% is less than the median change of 0.05%.
The monthly distribution is not as visually smooth or symmetrical, but presents a “pretty” good bell shaped curve. The average change of 0.67% is less than the median change of 0.91%.
The calendar year distribution requires a bit of squinting and some imagination to see a bell shaped curve — making it “sort of” normal looking. The average change of 8.02% is less than the median of 9.76%.
The most extreme outliers, as measured by standard deviation, are at the daily level, then monthly and lastly calendar year.
click images to enlarge
Daily % Price Change Distribution
Monthly % Price Change Distribution
Calendar Year % Price Change Distribution
Directly relevant S&P 500 index funds are: SPY, IVV and VFINX.
While the “worst” has been worse than the “best” has been better, the negative outliers can be filtered out with stop loss orders. If persistent trailing stop loss orders are used to filter out the bad or poor, not just the worst; while letting the positive deviations run, the returns are increased.
We will reproduce these data sometime again over a shorter period. The daily data will look the same, as most likely will the monthly distribution. The annual data will vary substantially over different shorter periods.
For the data hungry, we hope this is helpful.
Richard Shaw
QVM Group LLC
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China, Developed Markets, Investing Lessons, Market Commentary, QVM Group LLC, Richard Shaw, Sp 500
 About Richard Shaw (http://www.QVMgroup.com)
Richard is a principal of QVM Group LLC, a fee-based investment advisor based in Connecticut with clients across the country. He provides investment coaching to "do-it-yourself" investors, and manages portfolios for those who prefer not to make their own decisions. His investment approach is based on value, asset allocation, benchmarking, expense control, risk management, customizing portfolios to each client's specific circumstances, and regular communication about strategy and performance. The QVM Group team also provides municipal refinance services, strategic business planning and financial analysis service for new ventures, private acquisition analysis, and custom investment research. Richard's extensive experience, includes serving on the Board of Directors of Aberdeen Asset Management PLC (London Stock Exchange: ADN), membership on the Board of Directors of Phoenix Investment Counsel (renamed Virtus Investment Advisors), a U.S. pension manager and investment advisor to the Phoenix Funds (renamed Virtus Funds), as well as serving as Managing Director of a series of offshore investment funds based in Luxembourg. He has led institutional asset management sales and had overall responsibility for management of a U.S. mutual funds broker-dealer. He was a charter investor and member of the Board of Directors of several internet companies, including Lending Tree prior to its IPO. He is a graduate of Dartmouth College. QVM Group LLC is a Registered Investment Advisor. Visit the QVM Group website http://www.qvmgroup.com/QVMinvest/ |
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