Unchanged stocks by Charles A. Jaffe
Investors and the media focus on the winners and losers in the stock market. Issues that stand still are not only boring, but their inactivity is seldom a signal for anything. Or is it? Last summer, Anthony W. Tabell of the Princeton, New Jersey-based Delafield, Harvey, Tabell Inc. was struck by the fact that, on many days, more than 500 issues on the New York Stock Exchange (NYSE) were closing unchanged. Intrigued by the round number 500 and the fact that he couldn't remember, even from his younger days, such a high percentage of stocks not moving, Tabell decided to look at the history of standstills. For the purpose of historical comparison, Tabell translated 500 into 25.5% of the issues traded.
Tabell's research reaped some intriguing discoveries. The reason he couldn't remember 25.5% of the Big Board closing unchanged even during his youth, is that it never happened. Between 1958 and 1974, there was not a single day in which 25.5% of NYSE stocks were unchanged. But over history, a trading pattern with unusually high percentages of unchanged stocks emerge. Between 1926 and August 31, 1989 when Tabell released his information, 2,832 of the 17,150 trading days had seen 25.5% of the issues stand still. More than three-quarters of those incidents occurred in "clusters" lasting 100 days or more. Tabell defined a cluster as a period in which no two instances are separated by 25 days.