S&P 500 Weekly Gains And Losses

Last Updated on November 18, 2020 by Hakan Samuelsson

Last week was rather rough for the stock markets all over the world. In the first four days, the S&P 500 lost more than 4%. Media is of course full of negative and scary articles and it’s easy to lose the big picture. But according to my calculations, a weekly fall (from Friday to Friday on the close) of more than 4% has happened 53 times since 1993. That is 4% of the sample, so it happens quite often (in my opinion).

Here is the weekly distribution in percent (for example 547 observations/weeks where S&P rose more than zero but less than 2%):

The table below shows the return the following week after weeks with negative returns (if S&P 500 for example this week fell more than 5% then the average return next week is 1.53%):

<0 <-1 <-2 <-3 <-4 <-5
0.40 0.48 0.38 0.33 0.63 1.53

For comparison, the average weekly return over the whole period is 0.2%. In other words, any negative week shows much better performance the next week than any random week.

The table below shows the return the following week after weeks with positive returns:

>0 >1 >2 >3 >4 >5
0.05 -0.04 -0.11 -0.08 -0.36 -0.40

If this week was positive, we can expect a negative return next week.

We can conclude the S&P 500 has over the period shown strong mean reversion.