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The stock market is the best place to invest your money. But the stock market is also a strange place with a long history. There are so many great facts surrounding the stock market. It is fascinating.
There are tons of fascinating facts about the stock market. Today, I want to share 13 of these stock market facts. Some of them will probably surprise you a lot! At least, they did surprise me when I learned about it!
Knowing all these facts will probably not make you a better investor. But it is still very interesting to learn some details about the place you are investing your money in, no? Some of these surprised me. I hope you will find them interesting!
Without further ado, here are 13 awesome stock market facts!
1. The Stock Market is more than 400 years old!
Many people think that the stock market is something modern. Most people would say that it started about 100 years ago. But in fact, the stock market is ancient.
The idea of the stock market was started in the Netherlands in 1602. The Dutch East India Co. company started issuing paper shares. Shareholders could sell and buy these paper shares. This company was the first concept of a stock market. This lead to the creation of the oldest Stock Exchange, the Amsterdam Stock Exchange. Today it is known as the Euronext stock exchange.
2. There are more than 60 stock exchanges in the world!
When people talk about stock exchanges, they are talking about the New York Stock Exchange (NYSE) or the NASDAQ. These two are the biggest stock exchanges in the world. But there are over 60 stock exchanges in the world.
After the two American giants, there are three large Asian stock exchanges in the top 5. In order, these are the Japan Exchange Group (JPX), the Shangai Stock Exchange (SSE), and the Hong Kong Stock Exchange.
Interestingly, the Swiss Stock Exchange is still the 13th on the list, even though we have a tiny country.
The smallest stock exchange in the world is the Seychelles Stock Exchange. It only has four different stocks and a total market capitalization of about 100 million U.S. dollars.
3. The stock market is 70% likely to go up on any year
In any given year, the stock market is more likely to go up than to go down. For instance, in the last 100 years, the Dow Jones Industrial Average (DJIA) was up 70% of the year. And in the last 40 years, the Standard & Poor’s 500 (S&P500) was up 77% of the years. This is a very significant difference.
Of course, this is only historical data. But this has been going on for 100 years. There is a good chance that this continues.
It is one of the reasons why Dollar Cost Averaging (DCA) is not a great idea. Indeed, DCA is betting that the market will go down. But the stock market not likely to do so.
4. October is the most volatile month
There is a myth surrounding October in the stock market. There is even an effect called The October Effect.
People think that the stock market declines more during October than during all the other months. There were two big crashes in October. The Great Crash of 1929 and the Crash of 1987 were both in October.
But if we take the statistics over a long time, this effect is not significant. More bear markets were ending in October than starting in October. This data makes it more interesting. And these two crashes are old enough for most people to ignore them. Because of these points, fewer and fewer people believe in the October Effect.
However, according to data, October is the most volatile month in the stock market. There are more large swings in the stock market during October than during any other month. So, you need to be ready for some strong volatility during October.
5. September is the worst month
We just saw that a lot of people believe in The October Effect. On the same idea, September is the worst month for the stock market.
On average, since 1950, the Dow Jones Industrial Average (DJIA) has a decline of 0.8%. And for the same period, the Standard & Poor’s 500 index has a 0.5% decline. This decline is significantly less than all other months.
We do not know why this happens. It could be that some people cash their returns at the end of the summer, causing some downturn. Another possible reason would be that some traders are taking vacations in August. And when they come back, they exit some of their positions to cash their returns. This lead to some selling pressure and decline. But these are just suppositions. Overall, the September Effect is just another anomaly.
Now, should you sell everything before September? No, of course not! This result is just an average over many years. It could well change in the future. You should not do market timing based on such averages.
6. The United States makes 40% of the world stock market
The world stock market is enormous, with 60 stock market exchanges! But the United States stock market is the biggest by far!
As of 2018, the U.S. stock market represents 40% of the entire world stock market! It is much more than the second country, Japan, which makes 7.59% of the world stock market. It is really impressive that a single country makes so much of the stock market.
The five biggest countries stock market are (as of August 2018):
- The United States, 40.01%
- Japan, 7.59%
- China, 7.51%
- Hong Kong, 6.51%
- The United Kingdom, 4.49%
For those interested, our little country, Switzerland, stands at 2.01% of the world stock market. It is not too bad!
7. The Bear and Bull analogy comes from California
You probably have heard of bears and bulls in the stock market. A bear is somebody who bets on the stock market going down, and a bull bets on the stock market going up. But do you know why we use these animals like this?
These names come from the fact that a bear is attacking from the top in a downward motion. And a bull is attacking from below in an upward motion.
The origin of these terms is not entirely known. But the most plausible story for them comes from animal fights in California.
They had bear and bull fights in California. These fights were parties for the town on Sunday after church. They had many events and competitions, such as horse riding. And in the end, the big event was a fight between a Grizzly Bear and a Spanish Fighting Bull. During the fights, bears were generally on the defensive side while the bull was the first to attack. These fights may have led to the bear and bully analogy of the stock market.
We have already talked about Warren Buffett on this blog. He is considered one of the greatest investors of all time. And he founded Berkshire Hataway. But did you know that Berkshire Hataway shares were the most expensive in the entire stock market?
A Class A share of Berkshire Hataway (BRK.A) currently costs more than 300’000 dollars. It is pretty impressive. It went over 10’000 USD in 1992. In 2006, it was worth 100’000 USD already. Its value increased tenfold in 14 years, not too bad! It went over 200’000 dollars in 2014. And it went all the way to 300’000 in 2018.
It is interesting to note there are also class B shares of Berkshire Hataway (BRK.B). These shares do not have any voting rights. But they are much cheaper if you want to invest in this company.
9. The earliest investing book dates from 1688
If you were already surprised by the stock market’s age, you might be even more surprised by the old age of the first investing book!
The earliest book about investing is Confusion of Confusions by Josseph De La Vega. It is a Spanish book about speculation and investing.
The book is most famous for its four rules of speculation:
- Never advise anyone to buy or sell shares, or never listen to advice for stock picking
- Accept both your profits and your regrets. When you speculate, you are going to lose some money, and you need to be prepared.
- Profit in the stock market is goblin treasure. Sometimes profit is very high. Sometimes it is very low.
- He who wishes to become rich must have money and patience.
Incredibly, a book that is more than 300 years is still very much applicable to today’s stock market!
This fact is incredible. Until 2001, most stock markets, including the U.S. stock markets, were using fractions to price shares. You could have a share at 1 3/16 USD. I still cannot believe that they waited so long to switch to a proper decimal system.
The idea of fraction for shares come from Spanish currency. The Spanish used Gold doubloons as currency. And these doubloons could be divided into 2, 4, and 8 pieces. Why 8? Because they wanted people to be able to count them on their fingers. And for some reason, they did not count thumbs as fingers those days.
When the New York Stock Exchange started, it was using this system. What is very important to realize is that the smallest price difference was 12.5 cents. So, the lowest spread could only be 12.5 cents. At some point, they realized that this lowest spread was too big, and they added 1/16 dollar (6.25 cents) into the system. But then, in 2001, they upgraded to a proper decimal system. So, the smallest spread today is 1 cent.
11. The first Stock Market Bubble dates from 1720
Most people would think of the dot-com bubble of 2001 as the earliest stock market bubble. And maybe some people would even think of the Great Recession of 2009. I believe the earliest people would think of is the Great Depression of 1929.
But in fact, the earliest recorded stock market bubble was in 1720! It is known as the South Sea Bubble. The South Sea Company, a trading company in the United Kingdom, was quite successful. People were confident in the company since the King was the governor of the company.
In 1720, the South Sea company took over some of the government debt. Aside from that, they ran a promotion campaign to inflate their share price. It led to the rapid inflation of the share price. The price went from 100 GBP to more than 1000 GBP in less than a year by the end of August 1720. Everybody wanted to buy-in.
At the top, people started selling a lot to get their profits. This massive sale led to a rapid decline in the price. The price went back to 100 GBP by the end of the year. This decline led to many failures and bankruptcies. And a lot of British investors lost all their money during that bubble.
12. The New York Stock Exchange was not always called like that
Every stock market investor knows about the New York Stock Exchange (NYSE). NYSE is the biggest and most famous stock exchange in the world. But very few people know that it had another name before. For more than seventy years, it had another name.
In 1792, a group of traders joined and signed the Buttonwood Agreement. This agreement led to the creation of the New York Stock & Exchange Board.
Only in 1863, they changed the name to the New York Stock Exchange. It is also sometimes referred to as the Big Board.
13. One man used the stock market to understand the U.S. Hydrogen Bomb
This fact is so cool! What does the Hydrogen Bomb have to do with the stock market? Not a lot, but you can find things about it by looking at stock market valuations.
In the 1950s, the United States was researching the Hydrogen Bomb (or Thermonuclear Bomb). Physicists were forbidden to reveal which fuel they used for it. But a lot of people were curious about it.
A professor of economics, Armen Alchian, managed to find out that they used Lithium as fuel. He saw that during the tests, the stock price of Lithium Corp rose significantly. This company saw a return of 461% during the primary year of the experiment!
Armen Alchian tried to publish his findings. But it was forbidden by the government for national security. Only much later was he able to publish it!
Out of all these stock market facts, this is the one that surprised me the most.
As you can see, there are many interesting facts about the stock market. Some of these stock market facts are not well-known. It is interesting to learn about them for a change.
Knowing that the stock market is ancient puts things in perspective. There have been stock market bubbles for several hundred years now. I think people focus too much on the recent history of the stock market. They tend to ignore the earliest history. Hopefully, reading these facts will change this a little.
If you liked these facts about the stock market, read about The 13 Biggest Stock Market Myths!
I find it quite incredible that one man could discover the use of Lithium in the Hydrogen bomb by looking at the stock market.
What is your favorite fact? Do you know any other incredible facts about the stock market?