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.
Recent Intraday U.S. Stock Market Behavior December 2, 2013
“Intraday U.S. Stock Market Behavior” examines behavior of the S&P 500 Index at 15-minute intervals over the trading day during each of 2007 (bullish year) and 2008 (bearish year), finding slight tendencies for market weakness during mid-afternoon and market volatility at the beginning and the end of the trading day. Does recent data confirm these findings? To investigate, we calculate average cumulative returns and standard deviations of returns for both the S&P 500 Index and SPDR S&P 500 (SPY) measured at 5-minute intervals during the trading day over the last six months. Using 5-minute levels/prices for the S&P 500 Index and for SPY during 9:30-16:00 over the period August 2012 through November 2013, we find that: More…
Models, Trading Calendar and Momentum Strategy Updates November 29, 2013
We have updated the S&P 500 Market Models summary as follows:
- Extended Market Models regressions/rolled projections by one month based on data available through November 2013.
- Updated Market Models backtest charts and the market valuation metrics map based on data available through November 2013.
We have updated the Trading Calendar to incorporate data for November 2013.
We have updated the the monthly asset class momentum winners and associated performance data at Momentum Strategy.
Turn of the Year and Size in U.S. Equities November 27, 2013
The turn of the year (December-January) for the U.S. stock market includes the Santa Claus rally and the January effect. Some research indicates the latter is dead (and was driven essentially by small-capitalization stocks when alive). How does the stock market behave across the turn of the year for a recent sample? To check, we construct cumulative return profiles from 20 trading days before through 20 trading days after the end of the calendar year for the Russell 2000 Index, the S&P 500 Index and the Dow Jones Industrial Average (DJIA) since the inception of the Russell 2000 Index. Using daily and monthly levels of all three indexes from December 1987 through January 2013 (26 December and 26 January observations), we find that: More…
Stock Returns Around Thanksgiving November 21, 2013
Does the Thanksgiving holiday, a time of families celebrating plenty, give U.S. stock investors a sense of optimism that translates into stock returns? To investigate, we analyze the historical behavior of the S&P 500 Index 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 1950-2012 (63 events), we find that: More…
Bonds During the Off Season? November 11, 2013
As implied in “Mirror Image Seasonality for Stocks and Treasuries?”, have bonds recently been better than stocks during the “Sell-in-May” months of June through October? Are the behaviors of government and corporate bonds over this interval similar? Using dividend-adjusted monthly prices for the PIMCO Long-Term US Government A (PFGAX), PIMCO High Yield A (PHDAX) and for SPDR S&P 500 (SPY) during November 1998 (the earliest available for PFGAX) through October 2013, we find that: More…
Long-term SMA and TOTM Combination Strategy October 29, 2013
“Turn-of-the-Month Effect Persistence and Robustness” indicates that average absolute returns during the turn-of-the-month (TOTM) are strong for both bull and bear markets. Does a strategy of capturing all bull market returns and TOTM returns only during bear markets perform well? To investigate, we apply four strategies to S&P Depository Receipts (SPY) as a tradable proxy for the stock market: (1) buy and hold SPY; (2) invest in SPY (cash) when SPY closes above (below) its 200-day simple moving average (200-day SMA); (3) invest in SPY from the close five trading days before through the close four trading days after the last trading day of each month and cash at all other times (TOTM); and, (4) invest in SPY when SPY closes above its 200-day SMA and otherwise use the TOTM strategy (SMA + TOTM). We explore sensitivities of these strategies to a range of trading frictions. Using daily dividend-adjusted closing levels of SPY from inception (1/29/93) through 10/4/13 and contemporaneous three-month Treasury bill (T-bill) yields, we find that: More…
Does the Turn-of-the-Month Effect Work for Sectors? October 28, 2013
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 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)
In an additional (shorter) test, we add measurement of TOTM returns for SPDR Gold Shares (GLD) as a proxy for gold. 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 12/22/98 through 10/4/13 (178 months) and for GLD from 11/18/04 through 10/4/13 (107 months), we find that: More…
Turn-of-the-Month Effect Persistence and Robustness October 28, 2013
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 October 2013 (765 TOTMs) and for the Russell 2000 Index during October 1987 through October 2013 (313 TOTMs), we find that: More…
Testing Earnings Season (Alcoa to Wal-Mart) Trading Strategies October 16, 2013
Five years ago, a reader noted and asked: “CNBC’s Fast Money cited a ‘seasonal’ strategy described in Barron’s, as follows: Go long the market from Wal-Mart’s (WMT) earnings release until Alcoa’s (AA) earnings release and short the market from Alcoa’s earnings release until Wal-Mart’s earnings release (earnings season). Over the last six years, the market has been up nicely during the former period and down an average 8% during the latter. Any testing on this?” To test this strategy, we assemble AA earnings release dates and WMT earnings release dates since the beginning of 1997 (the earliest available for AA), estimating the date for one missing WMT release. This sample period is much longer than that cited. Using these earnings release dates, daily dividend-adjusted closes for S&P 500 SPDR (SPY) and ProShares Short S&P500 (SH) and the daily 13-week Treasury bill (T-bill) yields over the period 2/25/97 (6/21/06 for SH) through 10/8/13 (67 quarters), we find that: More…
Simple Tests of Sy Harding’s Seasonal Timing Strategy Last Updated: October 9, 2013
Several readers have inquired about the performance of Sy Harding’s Street Smart Report Online, which includes the Seasonal Timing Strategy. This strategy combines “the market’s best average calendar entry [October 16] and exit [April 20] days with a technical indicator, the Moving Average Convergence Divergence (MACD).” According to Street Smart Report Online, applying this strategy to a Dow Jones Industrial Average (DJIA) index fund generated a cumulative return of 213% during 1999 through 2012, compared to 93% for the DJIA itself. As a robustness test, we apply this strategy to the SPDR S&P 500 (SPY) exchange-traded fund since its inception. Using daily dividend-adjusted closing prices for SPY and daily 13-week Treasury bill (T-bill) yields during 1/29/93 (inception of SPY) through 9/30/13, we find that: More…