Are Monthly Asset Returns Normally Distributed?

A normal distribution, or bell curve, fairly accurately models the monthly returns for the S&P 500 (see blog post: Are S&P 500 Returns Normally Distributed?). Let's examine some other assets to see if their monthly returns are normally distributed. Below are plots of 564 months (47 years) of return data for domestic stocks (S&P 500 TR), international stocks (MSCI EAFE), commodities (S&P GSCI), real estate (NAREIT), precious metals (Gold) and bonds (10-yr US Treasury) sorted by monthly return plotted on a linear and log scale. From the plots it is apparent that the normal distribution reasonably accurately models the monthly returns of these assets.

 

Disclosure:

The information presented here is the opinion of the author and may quickly become outdated and is subject to change without notice. All material presented in this article are compiled from sources believed to be reliable, however accuracy cannot be guaranteed. No person should make an investment decision in reliance on the information presented here.

The information presented here is distributed for education purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or participate in any particular trading strategy.

Performance data showing past performance results is no guarantee of future returns.

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