S&P 500 Weekly Gains And Losses Distribution

Understanding how the S&P 500, a key indicator of the U.S. stock market, behaves on a weekly basis is crucial for investors to make informed decisions. In this article, we delve into the distribution of weekly gains and losses in the S&P 500, shedding light on its patterns and tendencies. By analyzing data spanning back to 1993, we uncover insights into the frequency of significant declines, the subsequent week’s performance, and the concept of mean reversion.

How does the return distribution of gains and losses look like in the S&P 500?

In this article, we calculate the average weekly gain in the S&P 500 and show you a distribution bar of the gains and losses. It turns out that the S&P 500 shows strong mean reversion: a weekly gain is most likely followed by weak returns, and weekly losses are followed by positive returns. 

Media is of course full of negative and scary articles and it’s easy to lose sight of the big picture.

S&P 500 weekly gains and losses distribution

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%):

Weekly gains following a negative week

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%):


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.

Weekly gains following a positive week

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


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.

How frequently has a weekly fall of more than 4% occur in the S&P 500 since 1993?

A weekly fall of more than 4% has occurred 53 times since 1993, which accounts for approximately 4% of the sample.

How does the average return the following week compare between negative and positive weeks in the S&P 500?

Negative weeks show much better performance the following week compared to any random week, with average returns significantly higher than the overall average. Conversely, positive weeks tend to be followed by negative returns the following week.

What is the S&P 500 and why is it important?

The S&P 500 is a stock market index that represents the performance of 500 of the largest companies in the United States. It’s important because it provides insight into the overall health of the U.S. stock market.

How often does the S&P 500 experience significant weekly falls?

Since 1993, there have been 53 instances of the S&P 500 falling by more than 4% in a single week, which accounts for about 4% of the total observations.

What is the mean reversion in the context of the S&P 500?

Mean reversion refers to the tendency of the S&P 500 to return to its average performance after experiencing gains or losses in a given week.

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