When markets go sharply south, investors often act shocked and bewildered. Allusions to "perfect storms" and hundred-year floods parade through the financial headlines as if the market gods were acting on a vendetta. The only problem is these market swoons happen a lot more frequently than weather metaphors suggest: Hundred-year floods seem to appear every three to five years. Scorched investors may be perpetually surprised, but periodic crashes are as old as the markets themselves.
While market history tracks when these crashes happen, the trickier question is what causes them. External shocks--events like Sept. 11, or Hurricane Katrina--are a logical suspect. But it turns out external events are rarely the culprit for big market downdrafts. External factors are responsible for less than 20% of the stock market's biggest moves in the past 50 years.
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