How Stock Market Crashes Don't Follow The Rules

Let’s face it, though the subject attracts a lot of attention, we aren’t on a firm footing in truly understanding extreme events, such as market crashes. Many approaches to stock market analysis are statistical. This makes sense. Investing is rife with numbers and data and lots of time periods to slice and dice. In fact, most of the time, the markets appear to helpfully follow basic statistical models. However, it’s not that easy with market crashes. Here, there is surprisingly little data to go on, and many things that we might believe to be true simply aren’t. Yes, the market will fall by about 10% about once a year on average.