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Dow Index Return Rate (DJIA) vs. Wilshire 5000 Return Rate
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DJIA Return Rate
Simultaneous Change
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DJIA Return Rate
Subsequent Change
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1% Rise in Wilshire 5000 Return Rate in 1 Year
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1% Fall in Wilshire 5000 Return Rate in 1 Year
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What does the table mean?
It indicates that a 1% Wilshire 5000 Return Rate increase over a 12 month period,
(from 5% to 6% for example) has typically been accompanied by a 0.83% Dow Index
Return Rate increase during that year and a 0.11% Dow Index Return Rate decline
the following year.
It also indicates that a 1% Wilshire 5000 Return Rate decline over a 12 month period,
(from 5% to 4% for example) has typically been accompanied by a 0.94% Dow Index
Return Rate decline during that year and a 1.16% Dow Index Return Rate increase
the following year.
The center column shows the change in the Dow Index Return Rate over 12 months,
depending on whether the period experienced a rising or falling Wilshire 5000 Return
Rate. The right column shows the change in the Dow Index Return Rate during the
year following an increase or decrease in the Wilshire 5000 Return Rate.
The data history in the middle column shows a strong tendency for the two
rates to move in the same direction during the same time period. However,
the data period for the two series is too short to be statistically significant.
The evidence for using the previous 12 month change in the Wilshire 5000
Return Rate to predict the future direction of the Dow Index Return Rate is
significant (right column). However, the direction of the rates are inversely
related to each other. A change in the Wilshire 5000 Return Rate suggests
that the Dow Index Return Rate will move in the opposite direction of the
Wilshire 5000 Return Rate. However, the data period for the two series is too
short to be statistically significant.
Annual rates are shown in the graph and calculations.
How Do I Use This Information?
There are many investment theories that are well publicized in the financial press.
Even though little or no historical data may be offered as evidence for such theories,
many investors use them subconsciously, if not intentionally.
Example Theories: Rising Inflation is bad for the stock market. A booming housing
market is good for the S&P 500 stock index. A falling fed funds rate means that long
term interest rates will fall.
There are many such theories. In this site, long term investment and economic data
is tested against decades to determine whether a relationship actually exists or not.
This historical correlation provides a vital aid in interpreting the often confusing
behavior of the financial markets. The perspective gained may be the difference
between staying the course or being blown and tossed by every investment theory
that is popular at the moment. What the majority assumes to be true, often is not. In
the final analysis, readers are admonished to follow the evidence, wherever it leads.
This page tests the relationship between the Wilshire 5000 Return Rate and the Dow
Index Return Rate. Suppose you are making a business or investment decision.
Suppose again that the decision hinges on whether the Wilshire 5000 Return Rate
and the Dow Index Return Rate tend to move in the same or opposite directions. The
data, graphs, and analysis above will enlighten you. You'll discover whether they
move with, inversely to, or independently of each other.
Suppose that the Wilshire 5000 Return Rate has risen sharply and that you need to
know what direction the Dow Index Return Rate is headed in the near future. Does the
recent increase in the Wilshire 5000 Return Rate provide a clue about the future
direction of the Dow Index Return Rate? The data history, graph, and analysis above
will show you how the Dow Index Return Rate has performed after increases in the
Wilshire 5000 Return Rate. You'll see if one indicator has been likely to signal a
change in another. This is not intended as a prediction, but merely as a clue to the
future from the annals of history. No man knows the future, unless he has the ability
to control the future.
This site compares data series for interest rates, stock indexes, economic indicators,
currency exchange rates and real estate values. Suppose that you want to see how
stock indexes are influenced by interest rates or the value of the dollar. Click one of
the stock index links on the right side of any page. Links to our multi-series graphs
and correlation analysis may be found at the bottom-center of the stock index pages.
Formula for periods with a rising Wilshire 5000 Return Rate:
1) Change in the Dow Index Return Rate DURING periods with a rising Wilshire 5000
Return Rate:
The abbreviated formula is: (Dow Index Return Rate Change / Wilshire 5000 Return
Rate Rise) x 1% = Published Rate.
The complete formula is: [(Average change in the Dow Index Return Rate over all
rolling 12 month periods with a rising Wilshire 5000 Return Rate) / (Average Rise in
the Wilshire 5000 Return Rate over the same 12 month periods)] x 1% = Published
Rate.
2) Change in the Dow Index Return Rate AFTER a rising Wilshire 5000 Return Rate:
The abbreviated formula is: (Subsequent Dow Index Return Rate Change / Wilshire
5000 Return Rate Rise) x 1% = Published Rate.
The complete formula is: [(Average change in the Dow Index Return Rate during the
12 months following any rolling 12 month base period with a rising Wilshire 5000
Return Rate) / (Average Rise in the Wilshire 5000 Return Rate over the 12 month
base periods)] x 1% = Published Rate.
Formula for periods with a declining Wilshire 5000 Return Rate:
1) Change in the Dow Index Return Rate DURING periods with a declining Wilshire
5000 Return Rate:
The abbreviated formula is: (Dow Index Return Rate Change / Wilshire 5000 Return
Rate Decline) x -1% = Published Rate.
The complete formula is: [(Average change in the Dow Index Return Rate over all
rolling 12 month periods with a declining Wilshire 5000 Return Rate) / (Average
decline in the Wilshire 5000 Return Rate over the same 12 month periods)] x -1% =
Published Rate.
2) Change in the Dow Index Return Rate AFTER a decreasing Wilshire 5000 Return
Rate:
The abbreviated formula is: (Subsequent Dow Index Return Rate Change / Wilshire
5000 Return Rate Decrease) x -1% = Published Rate.
The complete formula is: [(Average change in the Dow Index Return Rate during the
12 months following any rolling 12 month base period with a declining Wilshire 5000
Return Rate) / (Average decline in the Wilshire 5000 Return Rate over the 12 month
base periods)] x -1% = Published Rate.
Rolling 12 Month Periods Defined:
Overlapping 12 month periods in a monthly data base.
For example:
In the 24 month period included in 2000 - 2001, there are 13 complete rolling 12
month periods. The first is January, 2000 - December, 2000. The second is February,
2000 - January, 2001. The third is March, 2000 - February, 2001 and so on. The last
complete rolling 12 month period in the 2000 - 2001 period is January, 2001 -
December, 2001.
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