Sobering Dow Stats

by: Eddy Elfenbein

Eddy Elfenbein submits: Here's an Excel spreadsheet of the Dow’s closing value for every week. And by that, I mean every week. Starting from when Mr. Dow began calculating it by hand. All 5,698 weeks from May 12, 1896 until today.

Some stats: The Dow’s average weekly gain is puny, just 0.13% (this doesn’t include dividends). That’s equal to a $76 stock rising 10 cents in a week.

The weekly standard deviation is 2.56%. So the market’s average weekly swing is nearly 20 times its average weekly change. So 95% of what happens each week is pure noise. It’s totally meaningless.

And that noise hangs around for a long time. Even after five years, the Dow’s average return is still equal to one standard deviation (for cool math types, 1.0013^260 is roughly 2.56*[260^0.5]).

Think about that. That means that there’s roughly a 1-in-6 chance that the Dow will be exactly where it is half-a-decade from now. Five years, zippo capital gains.

The Dow is currently 2.8% higher than where it was five years ago today.

Let’s hope the next five years will be better.