Is a 4% Down Day a Black Swan?

On February 5, the SP500 experienced a drop of 4% in a day. We ask ourselves the question:  is a one-day 4% drop a common occurrence? The table below shows the number of 4% (or more) down days since 1970.

   4% down 4% down and bullish
From 1970 40 5


On average, a 4% down day occurred each 1.2 years, which is probably not a rare occurrence.

We next counted the number of days when the SP500 dropped 4% or more during a bull market. We defined the bull market as price > 200-Day simple moving average.  Since 1970 there have been 5 occurrences, i.e. on average once every 10 years. We don’t know whether this qualifies as a black swan event, but a drop of more than 4% during a bull market is indeed very rare.

The table below shows the dates of such  occurrences. It’s interesting to note that before the February 5 event, the last two 4% drops when price> 200-day SMA occurred around the dot-com period.

Date %change
September 11, 1986 -4.8
October 13, 1989 -6.1
October 27, 1997 -6.9
April 14, 2000 -5.8
February 5, 2018 -4.1


3 thoughts on “Is a 4% Down Day a Black Swan?”

  1. Blackswans are not about how often something happens. It is about how unexpected something is. Events that are unexpected don’t happen often, but things that don’t happen often are not always black swans. Merely throwing a number out is not enough.

    1. Agree. We cannot model Black Swans using a statistical distribution. The purpose of this exercise is to show that the Feb 5 down day is a rare, though not unprecedented, event

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