Friday, January 4, 2019

Published 11:42 PM by with 0 comment

Historic S&P 500 Variability

The news often covers 'major' swings in stock prices. How rare are these large swings?
Below is an interactive plot of the daily returns for the S&P 500 since 1950:


It's clear that some big swings have happened. October 1987 and October 2008 are particularly crazy. The years kind of run together there, so this is the same thing with the points grouped by year:


75% of the days in each year fell within the colored box for that year, and the bars extend to the max and min daily returns in that year. Looking at it this way, it's clear that the volatility in 2018 was larger than most of the past few years, but it was not historically large. 2018 was comparable to 2015 and much less volatile than years like 2008, 2009, and 2011.

It's hard to tell how often a 1.5% gain or 2% drop happens though. A histogram would help out here:


Now you can simply read how often a given daily return happens. That still requires looking at a plot and doing some mental math though. Wouldn't it be easier if I just wrote a tool that let you enter a return and see how rare it is?

Here is a simple tool that lets you enter a return and see how rare it is. Just enter a daily return and it will print out where it is in the distribution.

Enter the daily return



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