Behavior of the Standard & Poor's 500 Stock
by Cliff Sherry, Ph.D.
Is it stationary, random or independent?
Editor's note: In preparing for magazine publication, this article has been heavily condensed. Some
insights that were peripheral to the S&P's characteristics were deleted as were most comments on
statistical technique. Readers can find many technical details in previous S&C articles by Dr. Sherry.
Details of Dr. Sherry's calculations are available from him at (409) 823-0618
Standard & Poor's 500 Stock Index is important for a number of reasons. First it is used as a gauge of
general stock market performance. Only the Dow Jones Industrial Average is quoted more often. Second,
it is one of the 12 component time series of the Composite Index of Leading Economic Indicators. Third,
it is traded on the futures market of the International Monetary Market of the Chicago Merchantile
As an index, it measures the percentage change in market value (10) compared to a base period, the years
1941-1943. The 500 stocks in the index fall into four major groups: 400 industrials, 40 utilities, 20
transportations and 40 financials. These companies are not always the largest in their sectors but they do
represent large capitalization stocks with blue chip qualities.