Calendar Effects

Investor mood may affect financial markets. Sports may affect investor mood. The biggest mood-mover among sporting events in the U.S. is likely the National Football League’s Super Bowl. Is the week before the Super Bowl especially distracting and anxiety-producing? Is the week after the Super Bowl focusing and anxiety-relieving? Presumably, post-game elation and depression cancel between respective fan bases. Using past Super Bowl dates since inception and daily/weekly S&P 500 Index data for 1967-2011 (45 events), we find that: More…

We have updated the Market Models summary as follows:

• Extended the Earnings Forecast through the end of 2012 based on an estimate of actual earnings for the fourth quarter of 2011.
• Extended regressions/rolled projections by one month based on data available through January 2012.
• Updated backtest charts and the market valuation metrics map based on data available through January 2012.

We have updated the six-month lagged momentum asset class, sector and style ETF winners for January 2012 on the home page.

We have updated the Trading Calendar to incorporate data for January 2012.

Does seasonal fear of stock market weakness or demand for jewelry drive gold prices? In his January 2012 paper entitled “The Seasonality of Gold – Jewelery Demand and Investor Behavior”, Dirk Baur examines calendar month seasonality of the price of gold. Using daily gold bullion spot prices (London fixing) and COMEX gold futures prices during 1981 through 2010 (30 years), along with contemporaneous stock market index and gold jewelry demand data, he finds that: More…

Is the value premium seasonal? In their 2012 paper entitled “Is the Value Effect Seasonal? Evidence from Global Equity Markets”, Praveen Kumar Das and Uma Rao investigate the intersection of the January effect and the value premium in stock market indexes around the world. They consider market capitalization-weighted value and growth stock portfolios for the following indexes: Asia Pacific; Europe, Australasia and Far East (EAFE); Europe, with and without UK; Scandinavian countries; UK; U.S.; and, Japan. They define value (growth) stocks as the 30% with the highest (lowest) book-to-market ratios within their respective market indexes. Using monthly stock prices and lagged annual book-to-market ratios for stocks in these markets during 1975 (or inception if unavailable that early) through 2007, they find that: More…

Is there a preferred frequency and are there preferred month(s) for rebalancing traditional asset class portfolio holdings? To investigate we consider annual, semiannual and quarterly rebalancing of a simple portfolio targeting a 60-40 stocks-bonds mix. We consider all possible combinations of calendar month ends as rebalancing points. Because of estimation complexity, we ignore rebalancing (and dividend-reinvestment) frictions, thereby giving an an advantage to frequent rebalancing. Using dividend-adjusted monthly closes for SPDR S&P 500 (SPY) to represent stocks and Vanguard Total Bond Market Index (VBMFX) to represent bonds over the period January 1993 through December 2011 (228 months or 19 years), we find that: More…

Does long term data support belief that “as goes January, so goes the rest of the year” (January is the barometer) for the the U.S. stock market? Could this conventional wisdom be an artifact of data snooping or a victim of market adaptation? Robert Shiller’s long run sample, which calculates monthly levels of the S&P Composite Stock Index since 1871 as average daily closes during calendar months, offers data for testing. Using monthly levels of the S&P Composite Stock Index for 1871-2011 (141 years) and monthly closes of the S&P 500 Index for 1950-2011 (62 years), we find that: More…

Do more traders than usual move to the sidelines before long weekends to avoid the risk of bad news during the extended downtime, thereby depressing prices before the weekend and elevating them after with re-entry? To investigate, we analyze the behavior of the S&P 500 Index during the three trading days before and the three trading days after three-day weekends. Using daily closing levels of the S&P 500 Index for 1950-2011 (62 years and 351 three-day weekends), we find that: More…

Does the S&P 500 implied volatility index (VIX) exhibit systematic behaviors by day of the week, month of the year, turn-of-the-month (TOTM) or options expiration (OE)? If so, are the behaviors exploitable? Using daily closing levels of VIX since January 1990, daily opening levels of VIX since September 2003 and daily opening and closing levels of iPath S&P 500 VIX Short-Term Futures ETN (VXX) since February 2009, all through December 2011, we find that: More…

Are some calendar months more likely to exhibit stock market continuation (momentum) or reversal than others? To check, we relate U.S. stock index returns for each calendar month to those for the preceding 12 month and the preceding six months. Using monthly closes of the S&P 500 Index from December 1949 (using the January open for 1949) through December 2011 and the Russell 2000 index from September 1987 through December 2011, we find that: More…

Does long term data support belief in exceptionally strong performance by the U.S. stock market during the month of January? Could this conventional wisdom be an artifact of data snooping or a victim of market adaptation? Robert Shiller’s long run sample, which calculates monthly levels of the S&P Composite Stock Index since 1871 as average daily closes during calendar months, offers data for testing. Using monthly levels of the S&P Composite Stock Index for January 1871 through December 2011 (141 years), monthly closes of the S&P 500 Index for January 1950 through December 2011 (62 years) and dividend-adjusted monthly closes of iShares Russell 2000 Index (IWM) during May 2000 through December 2011, we find that: More…