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? These blog entries relate to calendar effects in the stock market.

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Stock Returns Around Memorial Day

Does the Memorial Day holiday signal any unusual return effects? By its definition, this holiday brings with it any effects from three-day weekends and sometimes the turn of the month. Prior to 1971, the U.S. celebrated Memorial Day on May 30. Effective in 1971, Memorial Day became the last Monday in May. To investigate the possibility of short-term effects on stock market returns around Memorial Day, we analyze the historical behavior of the stock market during the three trading days before and the three trading days after the holiday. Using daily closing levels of the S&P 500 Index for 1950 through 2014 (65 observations), we find that: Keep Reading

Continuation and Reversal Months?

Are some calendar months more likely to exhibit stock market continuation or reversal than others? In other words, is absolute (intrinsic) momentum an artifact of some months or all months? To investigate, we relate U.S. stock index returns for each calendar month to those for the preceding 3, 6 and 12 months. Using monthly closes of the S&P 500 Index from December 1949 (using the January 1950 open) through April 2015 and the Russell 2000 index from September 1987 through April 2015, we find that: Keep Reading

Momentum Strategy, Value Strategy and Trading Calendar Updates

We have updated the the monthly asset class momentum winners and associated performance data at Momentum Strategy.

We have updated the Trading Calendar to incorporate data for April 2015.

 

Effects of Execution Delay on Simple Asset Class ETF Value Strategy

“Effects of Execution Delay on Simple Asset Class ETF Momentum Strategy” investigates how delaying signal execution affects strategy performance. How does execution delay affect the performance of the complementary Best Value version of the “Simple Asset Class ETF Value Strategy”? This latter strategy each quarter allocates all funds to the one of the following asset class exchange-traded funds (ETF) associated with the most undervalued risk premium (term, credit or equity), or to cash if none are undervalued:

3-month Treasury bills (Cash)
iShares 7-10 Year Treasury Bond (IEF)
iShares iBoxx $ Investment Grade Corporate Bond (LQD)
SPDR S&P 500 (SPY)

To investigate, we compare 23 variations of the strategy that all use end-of-quarter (EOQ) to determine the best value asset but shift execution from the contemporaneous EOQ to the next open or to closes over the next 21 trading days (about one month). For example, an EOQ+5 Close variation uses an EOQ cycle to determine winners but delays execution until the close five trading days after EOQ. Using daily dividend-adjusted opens and closes for the risk premium proxies and the yield for Cash from the end of September 2002 through the end of March 2015 (51 quarters), we find that:

Keep Reading

Effects of Execution Delay on Simple Asset Class ETF Momentum Strategy

“Optimal Monthly Cycle for Simple Asset Class ETF Momentum Strategy?” investigates whether using a monthly cycle other than end-of-month (EOM) to determine the winning asset improves performance of the “Simple Asset Class ETF Momentum Strategy”. This strategy each month allocates all funds to the one of the following eight asset class exchange-traded funds (ETF), or cash, with the highest total return over the past five months:

PowerShares DB Commodity Index Tracking (DBC)
iShares MSCI Emerging Markets Index (EEM)
iShares MSCI EAFE Index (EFA)
SPDR Gold Shares (GLD)
iShares Russell 1000 Index (IWB)
iShares Russell 2000 Index (IWM)
SPDR Dow Jones REIT (RWR)
iShares Barclays 20+ Year Treasury Bond (TLT)
3-month Treasury bills (Cash)

In response, a subscriber asked whether sticking with an EOM cycle for determining the winner, but delaying signal execution, affects strategy performance. To investigate, we compare 23 variations of the strategy that all use EOM to determine the winning asset but shift execution from the contemporaneous EOM to the next open or to closes over the next 21 trading days (about one month). For example, an EOM+5 Close variation uses an EOM cycle to determine winners but delays execution until the close five trading days after EOM. Using daily dividend-adjusted opens and closes for the asset class proxies and the yield for Cash from the end of July 2002 (or inception if not available then) through the end of March 2015 (153 months), we find that: Keep Reading

Optimal Monthly Cycle for Simple Asset Class ETF Momentum Strategy?

As explored for a 10-month simple moving average (SMA) in “Optimal Cycle for Monthly SMA Signals?”, subscribers have inquired whether there is a best time of the month for measuring momentum in the “Simple Asset Class ETF Momentum Strategy”. This strategy each month allocates all funds to the one of the following eight asset class exchange-traded funds (ETF), or cash, with the highest total return over the past five months:

PowerShares DB Commodity Index Tracking (DBC)
iShares MSCI Emerging Markets Index (EEM)
iShares MSCI EAFE Index (EFA)
SPDR Gold Shares (GLD)
iShares Russell 1000 Index (IWB)
iShares Russell 2000 Index (IWM)
SPDR Dow Jones REIT (RWR)
iShares Barclays 20+ Year Treasury Bond (TLT)
3-month Treasury bills (Cash)

To investigate, we compare 21 variations of the strategy based on shifting the monthly return calculation cycle relative to trading days from the end of the month (EOM). For example, an EOM+5 cycle ranks assets based on closing prices five trading days after EOM each month. Using daily dividend-adjusted closes for the asset class proxies and the yield for Cash from late July 2002 (or inception if not available then) through early April 2014 (about 153 months), we find that: Keep Reading

Stock Returns Around Easter

Does the seasonal change marked by the Easter holiday, with the U.S. stock market closed on the preceding Good Friday, tend to produce anomalous returns? To investigate, we analyze the historical behavior of the S&P 500 Index before and after the holiday. Using daily closing levels of the S&P 500 index for 1950-2014 (65 events), we find that: Keep Reading

Does the Turn-of-the-Month Effect Work for Asset Classes?

Does the Turn-of-the-Month Effect, a concentration of positive stock market returns around the turns of calendar months, work across a broad set of asset classes. To investigate, we measure turn-of-the-month (TOTM) returns for the following eight asset class exchange-traded funds (ETF) used in the “Simple Asset Class ETF Momentum Strategy”:

PowerShares DB Commodity Index Tracking (DBC)
iShares MSCI Emerging Markets Index (EEM)
iShares MSCI EAFE Index (EFA)
SPDR Gold Shares (GLD)
iShares Russell 1000 Index (IWB)
iShares Russell 2000 Index (IWM)
SPDR Dow Jones REIT (RWR)
iShares Barclays 20+ Year Treasury Bond (TLT)

We define TOTM as the eight-trading day interval from the close five trading days before the first trading day of a month to the close on the fourth trading day of the month. Using daily dividend-adjusted closes for these ETFs from their respective inceptions (ranging from February 2006 for DBC to May 2000 for IWB) through February 2015 (109-178 months), we find that: Keep Reading

Does the Turn-of-the-Month Effect Work for Sectors?

A reader inquired whether the Turn-of-the-Month Effect, a concentration of positive stock market returns around the turns of calendar months, works for U.S. stock market sectors. To investigate, we measure turn-of-the-month (TOTM) returns for the nine sector exchange-traded funds (ETF) defined by the Select Sector Standard & Poor’s Depository Receipts (SPDR), all of which have trading data back to December 1998:

Materials Select Sector SPDR (XLB)
Energy Select Sector SPDR (XLE)
Financial Select Sector SPDR (XLF)
Industrial Select Sector SPDR (XLI)
Technology Select Sector SPDR (XLK)
Consumer Staples Select Sector SPDR (XLP)
Utilities Select Sector SPDR (XLU)
Health Care Select Sector SPDR (XLV)
Consumer Discretionary Select SPDR (XLY)

We define TOTM as the eight-trading day interval from the close five trading days before the first trading day of a month to the close on the fourth trading day of the month. Using daily dividend-adjusted closes for the sector ETFs and for S&P Depository Receipts (SPY) as a benchmark from December 1998 through February 2015 (195 months), we find that: Keep Reading

Turn-of-the-Month Effect Persistence and Robustness

Is the Turn-of-the-Month (TOTM) effect, a concentration of positive stock market returns around the turns of calendar months, persistent over time and robust to different market conditions. Does it exist for all calendar months? Does it interact with the U.S. political cycle? Does it work for different indexes? To investigate, we define TOTM as the interval from the close five trading days before to the close four trading days after the last trading day of the month (a total of eight trading days, centered on the monthly close). Using daily closes for the S&P 500 Index during February 1950 through February 2015 (782 TOTMs) and for the Russell 2000 Index during October 1987 through February 2013 (330 TOTMs), we find that: Keep Reading

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Current Momentum Winners

ETF Momentum Signal
for May 2015 (Final)

Winner ETF

Second Place ETF

Third Place ETF

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(Since August 2006)
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Top 3 ETFs SPY
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ETF Value Signal
for 2nd Quarter 2015 (Final)

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The asset with the highest allocation is the holding of the Best Value strategy.
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