But people don’t perceive that bubbles occur that infrequently. In research I’ve done with Robert Shiller and Dasol Kim, we conducted monthly surveys of U.S. investors over the past 25 years, asking about potential market crashes. Typically, they put the odds of a catastrophic crash in the next six months at 10% to 20%—much greater than history suggests. (Granted, the financial crisis of 2008-09 happened during our sample period and understandably terrified most savers.)
There have been a few seemingly catastrophic days when the market dropped precipitously. But not as many as you might think. Since 1887, there have been just four cases where the Dow Jones Industrial Average has dropped by more than 10% in a single day—and two of those were during the big crash of 1929.