Blog - Investing Notes

Blog Synthesis: Calendar Effects

The time of year affects human activities and moods, both through natural variations in the environment and through artificial customs and laws. Do such calendar effects systematically and significantly influence investor/trader attention and mood, and thereby equity prices? Here is a listing of past blog entries related to calendar effects in the stock market:

Stock Returns During and Between Earnings Seasons ...evidence does not support a belief that a strategy of going long (short) the broad stock market between (during) earnings seasons reliably beats, or even matches, a buy-and-hold strategy over long periods. Nor does it support a belief that the market tends to be relatively weak during earnings seasons over the long run.

The (Alcoa/Wal-Mart) Earnings Season Trading Strategy ...evidence does not support a belief that a strategy of going long (short) the broad stock market outside of (during) earnings season reliably beats, or even matches, a buy-and-hold strategy. It does support a belief that the market tends to be relatively weak during earnings season.

Intraday/Daily Stock Return Patterns ...traders may be able to shave a few basis points off trading costs by timing buys (sells) based on a tendency for exact daily recurrence of recent intraday lows (highs).

Does the Sunspot Cycle Predict Energy and Grain Prices? ...evidence does not support using sunspot activity to speculate on natural gas and wheat prices over periods of a quarter or a year.

The Sunspot Cycle and Stock Returns (Testing Charles Nenner) ...evidence does not support Charles Nenner's belief in a relationship between sunspot activity and stock returns (intermediated by magnetic effects on investors).

The January Barometer Retested ...though lacking theoretical foundation, evidence indicates that the January Barometer works for the broad U.S. stock market. However, it does not work elsewhere.

The Stock Market and the National Election Cycle ...there appear to be both long-term and short-term connections between the U.S. national election cycle and stock market performance, with presidential term year 3 (1) the best (worst) and a tendency for a brief election-time rally. However, the subsamples for presidential term year analysis are very small, so confidence in related tendencies is very low.

Trading Around Option Expiration Days ...there is some evidence that the overall stock market exhibits a little abnormal strength a few days before options expiration and weakness just after expiration. However, these tendencies appear too weak to trade.

U.S. Stock Returns Around the Year-End Holidays ...best guess is the U.S. stock market will show relative strength from the day before Christmas through the next six or so trading days, but noise dominates.

Mirror Image Seasonality for Stocks and Treasuries? ...monthly returns for mid-term to long-term Treasuries exhibit a seasonality that is roughly the mirror image of that for stock returns, with November standing out as an exception (strong for stocks and Treasuries).

U.S. Stock Returns Around Thanksgiving ...best guess is that any anomalous U.S. stock market strength around Thanksgiving will come one trading day before and one trading day after the holiday, but noise dominates.

Daily Returns/Volatilities Across the Calendar Year ...these models of daily U.S. stock returns and volatilities by calendar date offer another perspective on baseline expectations for different times of the year.

The Worst and Best Five-day Intervals of the Year ...overall results suggest support for a belief that investors tend to retreat from the market noticeably in September and surge back around the beginning of November.

The Worst and Best Days of the Year ...examination of stock returns by calendar date offers no good evidence of persistently good or bad dates, but it does support a belief that October is especially volatile.

End-of-Quarter Effect ...evidence suggests some weakness before ends of quarters and excess returns in the few days after ends of calendar quarters, but the effect is of low reliability and therefore risky to trade. The fourth quarter pattern is the most unique.

U.S. Stock Returns Around Labor Day ...best guess is that any anomalous U.S. stock market strength around Labor Day will come one trading day before or one trading day after the holiday, but noise dominates.

Buy at the Close and Sell at the Open? ...both individual stocks and broad funds have, on average, appreciated overnight and stalled or declined during the trading day over the past 14 years. The first hour of trading may be the worst hour.

4th of July Close-up: Fireworks or Dud? ...best guess is that any pre-holiday fireworks will fade to weakness. Maybe the optimists go to the beach.

Sector Performance by Calendar Month ...calendar effects may vary across stock market sectors, but with only eight full years of data (including the very unusual Internet technology bubble and a multi-year energy rally), these results offer only weak hints for calendar-based sector rotation.

Any Recent Day-of-the-Week Anomalies? ...there are no tradable differences in returns by day of the week evident in recent broad stock market data, and there is no reliable Monday-Tuesday reversal.

Any Stock Market Anomalies Around Three-day Weekends? ...there are no reliable anomalies regarding the direction of the stock market around three-day weekends since 1990, but the day after such weekends exhibits wider price swings than most other days. There may pent-up demand after a three-day weekend, but the demand is neither reliably long nor reliably short.

Another Test of the Turn-of-the-Month Effect ...historical data from the past 79 months suggests a turn-of-the-month effect for small-capitalization value stocks concentrated in the last five trading days and the first two or four trading days of the month.

A 12-Month Cycle for Stock Returns? ...there is a tendency for stocks worldwide to reprise their monthly return behavior every 12 months, with intracycle reversals, over periods of many years. Results suggest calendar-connected market structures.

The Quarterly Earnings Forecast Walk-Down ...analysts tend to walk their earnings forecasts down as release of actuals approaches, and this walk-down effect is stronger for analysts that have good relationships with management.

Hedge Funds Strongest Around the Turns of Odd Years? ...hedge funds in aggregate perform best around the turn of the year and during odd-numbered years. This seasonality is little different from that of the overall stock market.

Taking the Summer Doldrums Out of the Turn-of-the-Month Effect ...excluding the summer doldrums from a Turn-of-the-Month Effect strategy may enhance returns.

Test of the Turn-of-the-Month Effect ...S&P 500 index behavior over the past 16+ years indicates a fairly consistent and economically significant turn-of-the-month effect.

The Turn-of-the-Month Effect ...the significant concentration of excess stock market returns around the turns of calendar months is a long-standing and persistent effect.

Is the Year's Boo! Already on the Books? ...there is probably no Halloween effect distinct from the (diminishing) January effect in the U.S. stock market.

The Stock Market Before and After the Super Bowl ...the odds favor buying mid-week before the Super Bowl for a modest gain the next week.

The After-January Effect?: In case you are sick of hearing about the January effect…

Reader Contribution to Trading Calendar Analysis ...Aongus has generally confirmed across indices the seasonality trends found in our Trading Calendar analysis.

Stocks and Inflation: Flying in Calendar Formation?…there may be some relationship between inflation seasonality and stock market seasonality.

January Effect Alive and Well? ...history still favors small-capitalization value stocks in January.

Comprehensive Analysis of Calendar Effects ...calendar effects used to be but mostly aren't any more.

Testing the Halloween Effect ...the average investor in the U.S. equities will have difficulty avoiding relatively poor returns during the summer. They should focus on the winter months.

Biotech Seasonality? (A Lesson on Small Samples) ...use Jim Jubak's conventional wisdom on seasonal trends in biotech at your own considerable risk. Samples are too small to generate tradable conclusions.

When Mr. Smith Goes to Washington, Sell! ...stock market returns and volatility reflect investor uncertainty regarding the likelihood and nature of Congressional activity. This effect is economically significant.

Explaining Summer Doldrums ...investors should be inclined to sell speculative U.S. stocks in late spring and buy them in the fall.

Lunacy Revisited ...the stock market on average outperforms slightly during, and especially just after, new moons. The level of outperformance is small compared to market variability, yielding no index trading signal.

In summary, there is enough evidence for some calendar effects that investors/traders should consider them when making major portfolio changes, especially for stocks of small-capitalization firms.

See our Trading Calendar for annual and monthly profiles of S&P 500 index behavior.