Bear markets have notorious reputations for stock price volatility, where big daily changes in stock prices are a characteristic that distinguishes bear markets from bull markets.
These periods include bear market rallies, which often see outsized upward movements in stock prices that punctuate periods of corrections or bear markets and often extend into the early phases of recoveries from them.
That's relevant today because we've just seen two such rallies in the last two weeks, one on Wednesday, 26 December 2018 and Friday, 4 January 2018, where the S&P 500 (Index: SPX) rallied by an outsized amount with respect to its typical level of volatility.
What is an outsized amount for the stock market to go up in a single day? Building on our statistical analysis to quantify daily market volatility for the S&P 500 since 3 January 1950, we can put the threshold for identifying an outsized upward movement in its level at a 2.92% increase above its previous day's closing value, which is three standard deviations above the mean daily change of 0.034% for the index, where the variation in the percentage change is well-described by a normal distribution.
For the 17,364 daily observations we have covering the 69 years from 3 January 1950 through 4 January 2019, we count a total of 115 days where stock prices closed more than 2.92% above their previous days close, accounting for 0.66%, or roughly 1 in 151, of the total observations.
These outsized rallies are not evenly distributed throughout the period however. Going year by year, here's are the main periods where they are concentrated, which cover 100 of the 115 outsized single day rallies:
- 1955: 2 between 6 June 1955 and 6 July 1955.
- 1962: 3 between 29 May 1962 and 24 October 1962.
- 1974-1975: 8 between 12 July 1974 and 27 January 1975.
- 1982: 5 between 17 August 1982 and 30 November 1982.
- 1987: 3 between 20 October 1987 and 29 October 1987.
- 1990-1991: 3 between 27 August 1990 and 21 August 1991.
- 1997: 2 between 2 September 1997 and 28 October 1997.
- 1998: 5 between 1 September 1998 and 15 October 1998.
- 2000-2003: 25 between 16 March 2000 and 17 March 2003.
- 2008-2009: 29 between 11 March 2008 and 15 July 2009.
- 2010: 5 between 10 May 2010 and 1 September 2010.
- 2011: 8 between 9 August 2011 and 20 December 2011.
- 2018-2019: 2 between 26 December 2018 and 4 January 2019 (at this writing).
Aside from 1955, all of these periods where the S&P 500 experienced single day price gains of 2.92% or more have coincided with or closely followed negative corrections or bear markets for the S&P 500.
References
Yahoo! Finance. S&P 500 (^GSPC) Historical Prices, 3 January 1950 through 4 January 2019. [Online Database]. Accessed 4 January 2018.
Yardeni Research. Stock Market Briefing: S&P 500 Bull & Bear Market Tables. [PDF Document]. 13 February 2018.
Labels: SP 500, volatility
Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:
ironman at politicalcalculations.com
Thanks in advance!
This site is primarily powered by:
CSS Validation
RSS Site Feed
JavaScript
The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.
Other Cool Resources
Blog Roll
Materials on this website are published by Political Calculations to provide visitors with free information and insights regarding the incentives created by the laws and policies described. However, this website is not designed for the purpose of providing legal, medical or financial advice to individuals. Visitors should not rely upon information on this website as a substitute for personal legal, medical or financial advice. While we make every effort to provide accurate website information, laws can change and inaccuracies happen despite our best efforts. If you have an individual problem, you should seek advice from a licensed professional in your state, i.e., by a competent authority with specialized knowledge who can apply it to the particular circumstances of your case.
