Chapter 38: The Distribution of Stock Prices 187 
Lest you think that this example was biased by the fact that it was taken during 
a strong run in the NASDAQ market, here's another example, conducted with a dif­
ferent set of data- using stock prices between June 1 and July 18, 1999 (also 30 trad­
ing days in length). At that time, there were fewer large moves; about 250 stocks out 
of 2,500 or so had moves of more than three standard deviations. However, that's still 
one out of ten - way more than you've been led to expect if you believe in the nor­
mal distribution. The results are shown in Table 38-3. 
TABLE 38-3. 
More stock price movements. 
Total Stocks: 2,447 Dates: 6/1 /99-7 /18/99 
Upside Moves: 
Downside Moves: 
3cr 
104 
54 
4cr 
28 
19 
Scr 
13 
7 
>6cr 
12 
14 
Total number of stocks moving >=3cr: 251 ( 10% of the stocks studied) 
Total 
157 
94 
Finally, one more example was conducted, using the least volatile period that 
we had in our database - July of 1993. Those results are in Table 38-4. 
TABLE 38-4. 
Stock price movements during a nonvolatile period. 
Total Stocks: 588 Dates: 7 /1 /93-8/17 /93 
3cr 4cr Scr >6cr Total 
Upside Moves: 14 5 1 1 21 
Downside Moves: 28 5 3 4 40 
Total number of stocks moving >=3cr: 61 ( 10% of the stocks studied) 
At first glance, it appears that the number of large stock moves diminished dra­
matically during this less volatile period in the market - until you realize that it still 
represents 10% of the stocks in the study. There were just a lot fewer stocks with list­
ed options in 1993 than there were in 1999, so the database is smaller (it tracks only 
stocks with listed options). Once again, this means that there is a far greater chance 
for large standard deviations moves - about one in ten - than the nearly zero percent 
chance that the lognormal distribution would indicate. 
VOLATILITY BUYER'S RULE! 
The point of the previous discussion is that stocks move a lot farther than you might 
expect. Moreover, when they make these moves, it tends to be with rapidity, gener-