Does the Stock Market See More Ups or Downs?

The stock market wears two costumes: a bull one and a bear one. It ever-so-slightly prefers the bull attire.

Perhaps because people remember losing everything more vividly than they remember winning big, it may seem that devastating drops, such as the 512 point, 4.3 percent plummet in the Dow Jones Industrial Average on Aug. 4, happen more often than dramatic rises. In the course of history, though, the fluctuations nearly balance out over time, leaning toward the upside.

The above chart is a histogram displaying the number of trading days since 1896 (when the Dow Jones was founded) that it closed at each of a range of percent changes. There have been about 1,800 days, for example, when there was no overall change in the index from the previous day. There was a 2 percent drop on just over 100 days, and a 2 percent rise on just over 100 others. The larger the percent change, the less often it has happened.

The chart was compiled by Dogs of the Dow, a website devoted to the DJIA and investment strategy. Of the data, they write, "This chart approaches a normal distribution (bell curve) thereby suggesting that the daily changes in the Dow are random." Overall, though, "the [average daily gain] is 0.026 percent demonstrating the upward bias of the Dow."

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