Average Monthly Returns Stocks

Analytical Toolbox: Average Monthly Performance for Stocks

The free weekly Chart of the Day service provides a wide range of interesting data for the market and the economy. The charts provide a really nice longer-term, big picture perspective on current conditions.  The charts are most useful when the reader has a good feel for the characteristics of the underlying data.

Figure 1 is a reprint of the Chart of the Day which provides average performance for the Dow Jones Industrial Average )

For more information on the Chart of the Day service, please go to Chartoftheday.com at Chart of the Day .

As of mid-month, the Dow (INDU) lost 672.52 points which corresponds to a 5.35% decline, a bit beyond the average month decline since 1950. If we were to end the month here, where does that value fall when you break out the numbers a bit more?

When breaking out average monthly returns by decade, such a decline seems extreme and almost makes a case for a rally from here, but don’t jump the gun. Averages can be very handy when the overall data is well understood. In the case of the stock market, actual values can deviate a good deal from the averages. That a characteristic of the “fat tail” expression you may hear about the market.

Figure 2 provides average monthly returns for the Dow by decade since 1921(data downloaded via Worden Brothers, Inc.’s  TeleChart package). In case it’s tough to see the axis extremes provided on the top of the chart, the range goes from -5% on the left to +5% on the right.

Figure 2 Average Monthly Returns by Decade (1921-2010)

A standard deviation measure provides you with a sense of how widely dispersed returns can be, but taken by itslef isn’t very useful. The same exact standard deviation value for two different data sets can suggest very volatile conditions or very stable conditions—it just depends on the values within the set.

A quick and inexact way to get a feel for things is to look at average and median, or middle values for the data. Figure 3 provides a line chart for the average value minus the median value by decade, by month. The wide-ranging red line gives you a fell for the extremely volatile conditions investors experienced in the 1930s.

Figure 3 (Average – Median) Monthly Returns by Decade (1921-2010)

The aqua line (1960s) remains closer to the zero level, suggesting calmer conditions that decade. Since there are quite a few data series in a small chart, I’ve highlighted some while making others a little less visible. The main take away  here is that the actual data ranges can deviate a bit from averages provided. In addition, the deviations seem to appear more below the zero line, or to the downside, then to the upside.

Analytical Toolbox: Average Monthly Performance for Stocks ...

The free weekly Chart of the Day service provides a wide range of interesting data for the market and the economy. The charts provide a really nice longer-term, big picture perspective on current conditions.  The charts are most useful when the reader has a good feel for the characteristics of the underlying data.

Figure 1 is a reprint of the Chart of the Day which provides average performance for the Dow Jones Industrial Average )

For more information on the Chart of the Day service, please go to Chartoftheday.com at Chart of the Day .

As of mid-month, the Dow (INDU) lost 672.52 points which corresponds to a 5.35% decline, a bit beyond the average month decline since 1950. If we were to end the month here, where does that value fall when you break out the numbers a bit more?

When breaking out average monthly returns by decade, such a decline seems extreme and almost makes a case for a rally from here, but don’t jump the gun. Averages can be very handy when the overall data is well understood. In the case of the stock market, actual values can deviate a good deal from the averages. That a characteristic of the “fat tail” expression you may hear about the market.

Figure 2 provides average monthly returns for the Dow by decade since 1921(data downloaded via Worden Brothers, Inc.’s  TeleChart package). In case it’s tough to see the axis extremes provided on the top of the chart, the range goes from -5% on the left to +5% on the right.

Figure 2 Average Monthly Returns by Decade (1921-2010)

A standard deviation measure provides you with a sense of how widely dispersed returns can be, but taken by itslef isn’t very useful. The same exact standard deviation value for two different data sets can suggest very volatile conditions or very stable conditions—it just depends on the values within the set.

A quick and inexact way to get a feel for things is to look at average and median, or middle values for the data. Figure 3 provides a line chart for the average value minus the median value by decade, by month. The wide-ranging red line gives you a fell for the extremely volatile conditions investors experienced in the 1930s.

Figure 3 (Average – Median) Monthly Returns by Decade (1921-2010)

The aqua line (1960s) remains closer to the zero level, suggesting calmer conditions that decade. Since there are quite a few data series in a small chart, I’ve highlighted some while making others a little less visible. The main take away  here is that the actual data ranges can deviate a bit from averages provided. In addition, the deviations seem to appear more below the zero line, or to the downside, then to the upside.

Stocks for the long run, the definitive guide to financial market returns and long-term investment strategies

Corporate Finance, Linking Theory to What Companies Do

Managed futures and their role in investment portfolios

Fundamentals of corporate finance

Economic review