Stock Returns Are Not Normally Distributed

For anyone still holding tight to the delusion that stock returns follow a bell curve, here's an interesting little research note.

Over the 1991-2008 period, if we assumed stock returns did follow a normal distribution, out of 3000 liquid stocks, including the ones that got delisted (to reduce survivorship bias), 278 stocks should have declined by 75% or more. In reality, 2179 stocks have fallen by at least 75%.

The bell curve prediction is therefore off by about 700%, showing the assumption of normally distributed stock returns to be somewhat faulty.