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 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 1950-2013 (64 events), we find that: Keep Reading

Recent Intraday U.S. Stock Market Behavior

“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 March 2014, we find that: Keep Reading

Models, Trading Calendar and Momentum Strategy Updates

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 March 2014.
  • Updated Market Models backtest charts and the market valuation metrics map based on data available through March 2014.

We have updated the Trading Calendar to incorporate data for March 2014.

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

Trading Around Option Expiration Days

Are there any stock market return/volatility anomalies around the equity option expiration (OE) day (third Friday of each month)? Potential anomalies include: (1) systematic differences in returns and volatilities before, on and after OE; and, (2) systematic differences in OE returns conditional on prior-month returns. To investigate, we examine close-to-close returns from five trading days before through five trading days after OE. Using daily closing prices for the S&P 500 Index for January 1990 through December 2013 (287 OEs, with September 2001 excluded due to trading disruption) and for the iPath S&P 500 VIX Short-Term Futures ETN (VXX) during January 2009 through December 2013 (59 OEs), we find that: Keep Reading

Style Performance by Calendar Month

The Trading Calendar presents full-year and monthly cumulative performance profiles for the overall stock market (S&P 500 Index) based on its average daily behavior since 1950. How much do the corresponding monthly behaviors of the various size and value/growth styles deviate from an overall equity market profile? To investigate, we consider the the following six exchange-traded funds (ETF) that cut across capitalization (large, medium and small) and value versus growth:

iShares Russell 1000 Value Index (IWD) – large capitalization value stocks.
iShares Russell 1000 Growth Index (IWF) – large capitalization growth stocks.
iShares Russell Midcap Value Index (IWS) – mid-capitalization value stocks.
iShares Russell Midcap Growth Index (IWP) – mid-capitalization growth stocks.
iShares Russell 2000 Value Index (IWN) – small capitalization value stocks.
iShares Russell 2000 Growth Index (IWO) – small capitalization growth stocks.

Using monthly dividend-adjusted closing prices for the style ETFs and S&P Depository Receipts (SPY) over the period August 2001 through December 2013 (150 months, limited by data for IWS/IWP), we find that: Keep Reading

Sector Performance by Calendar Month

The Trading Calendar presents full-year and monthly cumulative performance profiles for the overall stock market (S&P 500 Index) based on its average daily behavior since 1950. How much do the corresponding monthly behaviors of the various stock market sectors deviate from an overall market profile? To investigate, we consider the nine sectors 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)

Using monthly adjusted closing prices for these exchange traded funds (ETF) since inception, along with contemporaneous data for Standard & Poor’s Depository Receipts (SPY) as a benchmark, for December 1998 through December 2013 (181 months), we find that: Keep Reading

Asset Class ETF Momentum Winner Performance by Calendar Month

A subscriber asked how the “Simple Asset Class ETF Momentum Strategy” performs by calendar month. To investigate, we return to the following eight asset class exchange-traded funds (ETF), plus cash:

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)

We allocate all funds at the end of each month to the asset class ETF or cash with the highest total return over the past five months (5-1). Using monthly adjusted closing prices for the asset class proxies and the yield for Cash over the period July 2002 through December 2013 (138 months), we find that: Keep Reading

Stock Market and the Super Bowl

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 through 2013 (47 events), we find that: Keep Reading

January Barometer Over the Long Run

Does long term data support the belief that “as goes January, so goes the rest of the year” (January is the barometer) for the the U.S. stock market? 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 1871-2013 (143 years) and monthly closes of the S&P 500 Index for 1950-2013 (64 years), we find that: Keep Reading

January Effect Over the Long Run

Does long term data support belief in the January effect, exceptionally strong performance by the U.S. stock market during the month of January? 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 2013 (143 years), monthly closes of the S&P 500 Index for January 1950 through December 2013 (64 years), we find that: Keep Reading

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