Stock returns aren't normally distributed. Very small daily returns occur more frequently than a normal distribution would suggest, and very large daily returns also occur more frequently than a normal distribution would suggest. The "average" move, perhaps unintuitively, occurs less frequently than a normal distribution would imply. If this doesn't make sense, imagine a room with five basketball players and five jockeys. The average height of the jockeys might be 5' to 5'6" tall averaging 5'3", and the NBA players might be 6'3" to 6'9" averaging 6'6" tall. The average for the room would be 5'10½", yet there's a huge gap between the tallest jockey, who is 5' 6" and the shortest basketball player, who is 6'3". The average height in the room is 5' 10½"; close to the average height of the Ame

See Full Page