From Philosophical Economics:
How Often Does the Stock Market Correct?
‘Tis the season for corrections, and so we ask, how often do they occur historically?
To answer the question, we will use a total return index (daily, built from CRSP data back to January 3rd, 1928), rather than a simple price index. The reason we will use a total return index is that in the past, companies paid out a much greater share of their earnings as dividends than they do in the present. But dividends, when paid out, represent step reductions in corporate net worth, and therefore entail step reductions in price. Dividends thus make it more likely that the market will hit an X% correction target on price, all else equal. By using a total return index rather than a price index, we eliminate this distortion.
We will analyze two different periods: a full period, from January 3rd, 1928 to August 28th, 2014 and a post-war period, from January 2nd, 1945 to August 28th, 2014.
The following charts … show all of those times where a buy and hold investor was down, on a total return basis, by more than X% from any prior all-time high.
There is a lot more in the original post. I was able to replicate this using S&P data starting in 1960, getting very similar results.