A deeper look into the history of stocks

For this blog post I wanted to investigate how different industry’s stocks change over time and which are performing well vs. bad stocks. To accomplish this, I downloaded stock market data from Kaggle dating back to 1970 and combined data on stock market industry with historic stock market data on a day to day basis. I joined them on the ticker category on the historic price data to preserve the history, but include the industry and sector that the company is associated with.

To start I began at looking which sectors contain the most stocks. As you can see around 1980 the stock market began to take off and different sectors began to reign power of the consumers’ money. To see which industries expanded we can look at the count of individual stocks per sector.

As you can see the many industries expanded at the same time, but technology was one of the large chargers behind the finance and consumer services industries. I want to focus on technology because of the next graph. The next graph shows the volume of stock sold in each industry in a given year. This should really give us an insight into what consumers are buying and selling.

As you can see, starting in the 80s, the technology sector saw massive volumes of stock being traded. Especially during the 80s and 90s other industries didn’t experience much change in the volume of stock traded, but technology was increasing at a tremendous rate. Continuing to investigate the volume of stocks, we can look at the average volume of a stock in an industry.

This chart is looks similar but gives a completely different insight into the sectors. It’s similar in the sense you can see peaks in the late 1980s and late 2000s, and technology is still at the top. But this gives us insight into the volume of the average stock in a specific sector. As you can see, in the late 80s and early 90s, the technology industry saw the most movement in terms of average volume moved. This may have been cause by Black Monday which occurred in 1987 which was a period of sudden and unexpected downward movement in many stocks. So many people were trying to sell their stocks to minimize losses thus the spike in volume. Then the volume of stocks decrease after the spike in all other industries besides technology which rebounds a few years later and sees another peak in the amount of stock traded in the early 90s then a decrease in volume.This could be explained by people buying and holding stock without selling it. The reason consumers were doing this could be explained by the Dot Com bubble that was generated between 1994 and 2000 where there was over speculation in the technology industry. This can be more visualized if we isolate the technology industry and color it by the average % change per quarter:

This visualization lets us really see how the technology industry changed over time. The color scale allows us to see the more severe drops and increases in the market by coloring it only though -50% and +50%. This lets us see extremes a bit easier. Like I mentioned before, Q4 of 1987 experienced on average a -50% change in a companies stock. Then you can also see the Dot Com bubble generate. You can see many quarters in the green between 1994–1999. You can also see the bubble bust and drop change in 2000, and early 2001 with most bars leaning towards deep red in those later years. And we can see the stock market crash in 2008 with a very large sudden crash with the average stock dropping more than -50% again, similar to 1987.

If we look a little more recently like 2010–2018, the tech industry on average has not really seen an increase in value overall, and actually on a slight decrease, with less people buying and selling stocks. This could be caused by the stock market crash in 2008 and people being hesitant to invest in the stock market. Before 2008 the stock market experienced a lot more highs and lows as you can see by the dramatic shifts in color based on quarter. But once you start looking more recently, you can see the color stay pretty consistent. This made me wonder, are other industries seeing their stock do similar things? Is there a “good industry” to invest in right now? Hint, the answer is not really.

At first look this image is a bit daunting, but it gives us a lot of information. Each line is a different sector, but it’s not really important to trace each one. What I want you to look at is the recent years. Looking near the 2017 mark we can see that out of the top 10 traded sectors based on volume, all have been on a decrease in recent years. So is there a good industry to invest in right now? Well according to the average change, it doesn’t look like it.

The top 5 industries are not really experiencing much upward movement, with energy dropping a lot since 2008.

So what can I learn from this data to allow me to make financial decisions about? Well let us look at the top 1000 tickers based on volume traded and see how they’ve been performing. I chose the top 1000 based on volume because that should be the “popular” stocks.

As you can see, overall, there has been less tickers in the top 1000 performing well in recent years when compared to 1990–2005 when there were many more companies experiencing large change in a single year. If we narrow our search to the top 100 tickers based on volume, you can see the spread narrow.

As you can see, the spread becomes a lot tighter based on change, so the top 100 traded companies based on volume, are more stable companies. Let’s narrow again to top 50 and change the scale to understand them a bit better.

So in this visualization, you can still tell there are companies doing bad, but for the most part the top 50 are experiencing positive change, now we’re getting someplace we care about. So there are some good companies inside each industry, so let’s look into ones that might be a good investment.

So here are the top traded stocks in the tech industry. As you can see the top stocks go up are might be a good investment, because they are stable, where as many other stocks are too volatile to be a good investment right now.