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Dow Industrial Average Return Rate vs. S&P SmallCap 600 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 S&P SmallCap 600 Return Rate in 1 Yr
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1% Fall in S&P SmallCap 600 Return Rate in 1 Yr
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What does the table mean?
It indicates that a 1% S&P SmallCap 600 Return Rate increase over a 12 month
period, (from 5% to 6% for example) has typically been accompanied by a 0.36% Dow
Industrial Average Return Rate increase during that year and a 0.46% Dow Industrial
Average Return Rate decline the following year.
It also indicates that a 1% S&P SmallCap 600 Return Rate decline over a 12 month
period, (from 5% to 4% for example) has typically been accompanied by a 0.54% Dow
Industrial Average Return Rate decline during that year and a 0.36% Dow Industrial
The center column shows the change in the Dow Industrial Average Return Rate over
12 months, depending on whether the period experienced a rising or falling S&P
SmallCap 600 Return Rate. The right column shows the change in the Dow Industrial
Average Return Rate during the year following an increase or decrease in the S&P
SmallCap 600 Return Rate.
The data history in the middle column shows a significant tendency for the
two rates to move in the same direction during the same time period.
The evidence for using the previous 12 month change in the S&P SmallCap
600 Return Rate to predict the future direction of the Dow Industrial Average
Return Rate is significant (right column). However, the direction of the rates
are inversely related to each other. A change in the S&P SmallCap 600
Return Rate suggests that the Dow Industrial Average Return Rate will move
in the opposite direction of the S&P SmallCap 600 Return Rate.
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 S&P SmallCap 600 Return Rate and the
Dow Industrial Average Return Rate. Suppose you are making a business or
investment decision. Suppose again that the decision hinges on whether the S&P
SmallCap 600 Return Rate and the Dow Industrial Average Return Rate tend to move
in the same or opposite directions. The data, Dow History Chart, and analysis above
will enlighten you. You'll discover whether they move with, inversely to, or
independently of each other.
Suppose that the S&P SmallCap 600 Return Rate has risen sharply and that you
need to know what direction the Dow Industrial Average Return Rate is headed in the
near future. Does the recent increase in the S&P SmallCap 600 Return Rate provide
a clue about the future direction of the Dow Industrial Average Return Rate? The data
history, Dow History Chart, and analysis above will show you how the Dow Industrial
Average Return Rate has performed after increases in the S&P SmallCap 600 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 S&P SmallCap 600 Return Rate:
1) Change in the Dow Industrial Average Return Rate DURING periods with a rising
S&P SmallCap 600 Return Rate:
The abbreviated formula is: (Dow Industrial Average Return Rate Change / S&P
SmallCap 600 Return Rate Rise) x 1% = Published Rate.
The complete formula is: [(Average change in the Dow Industrial Average Return
Rate over all rolling 12 month periods with a rising S&P SmallCap 600 Return Rate) /
(Average Rise in the S&P SmallCap 600 Return Rate over the same 12 month
periods)] x 1% = Published Rate.
2) Change in the Dow Industrial Average Return Rate AFTER a rising S&P SmallCap
600 Return Rate:
The abbreviated formula is: (Subsequent Dow Industrial Average Return Rate
Change / S&P SmallCap 600 Return Rate Rise) x 1% = Published Rate.
The complete formula is: [(Average change in the Dow Industrial Average Return
Rate during the 12 months following any rolling 12 month base period with a rising
S&P SmallCap 600 Return Rate) / (Average Rise in the S&P SmallCap 600 Return
Rate over the 12 month base periods)] x 1% = Published Rate.
Formula for periods with a declining S&P SmallCap 600 Return Rate:
1) Change in the Dow Industrial Average Return Rate DURING periods with a
declining S&P SmallCap 600 Return Rate:
The abbreviated formula is: (Dow Industrial Average Return Rate Change / S&P
SmallCap 600 Return Rate Decline) x -1% = Published Rate.
The complete formula is: [(Average change in the Dow Industrial Average Return
Rate over all rolling 12 month periods with a declining S&P SmallCap 600 Return
Rate) / (Average decline in the S&P SmallCap 600 Return Rate over the same 12
month periods)] x -1% = Published Rate.
2) Change in the Dow Industrial Average Return Rate AFTER a decreasing S&P
SmallCap 600 Return Rate:
The abbreviated formula is: (Subsequent Dow Industrial Average Return Rate
Change / S&P SmallCap 600 Return Rate Decrease) x -1% = Published Rate.
The complete formula is: [(Average change in the Dow Industrial Average Return
Rate during the 12 months following any rolling 12 month base period with a declining
S&P SmallCap 600 Return Rate) / (Average decline in the S&P SmallCap 600 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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