(MarketWatch) Monday's market plunge may have been the worst point drop ever for the Dow Jones Industrial Average, but in percentage terms it came nowhere close. It dropped 7% on Monday, or just one-third as much as the 22.6% decline in the 1987 crash.
In fact, there have been 16 other occasions since the Dow was created in 1896 in which the Dow's percentage drop was greater than it was Monday. That works out to an average of every seven years.
It furthermore has been almost exactly seven years -- Sept. 17, 2001 -- since the last time the Dow dropped by a greater amount than it did on Monday.
From at least one statistical perspective, this all adds up to Monday's drop being overdue.
Several years ago, researchers at New York University and Boston University derived a complex formula for calculating how often drops of a particular magnitude will occur over long periods of time (measured in centuries). Read study.
According to their formula, 7% declines will occur, on average, every 4.3 years. Going into Monday's session, the market had been going 2.7 years longer than this without that big a drop.
To be sure, the S&P 500 index dropped by more than the Dow did on Monday -- by 8.8%, in fact. And, according to the researchers' formula, drops of that magnitude should occur only once every 10 years, on average.
But the last time the S&P 500 dropped by more than it did Monday was in the 1987 crash -- more than 20 years ago.
So, from this perspective, the S&P 500 was more than a decade years overdue for a decline like the one we saw Monday.
This doesn't make Monday's losses any less painful. But the researchers' data serve to remind us that big drops are an inherent part of stock-market investing.
If we didn't know that going into Monday, we surely do now.