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.
Stock Market Performance by Intra-year Phase January 2, 2012
The full-year Trading Calendar suggests that the U.S. stock market may have three phases over the calendar year, corresponding roughly to calendar year trading days 1-84 (January-April), 85-210 (May-October) and 211-252 (November-December). What are typical stock market returns and volatilities for these phases? Using daily S&P 500 Index closing levels from 1950 through 2011 (62 years), we find that: More…
Stock Returns Around New Year’s Day December 22, 2011
Does the New Year’s Day holiday, a time of replanning and income tax positioning, systematically affect investors in a way that translates into stock returns? To investigate, we analyze the historical behavior of the S&P 500 Index during the five trading days before and the five trading days after the holiday. Using daily closing levels of the S&P 500 index for 1950-2010 (61 events, with 2009 corresponding to New Year’s Day 2010), we find that: More…
Stock Returns Around Christmas December 16, 2011
Does the Christmas holiday, a time of putative good will toward all, 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 five trading days before and the five trading days after the holiday. Using daily closing levels of the S&P 500 index for 1950-2010 (61 events), we find that: More…
Style Performance by Calendar Month December 15, 2011
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 November 2011 (124 months, limited by data for IWS/IWP), we find that: More…
Sector Performance by Calendar Month December 13, 2011
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 November 2011 (156 months), we find that: More…
Stock Index Futures Calendar Effects November 21, 2011
Do calendar effects found in stock markets also appear in broad stock index futures? In their November 2011 paper entitled “Calendar Anomalies in Stock Index Futures”, Oscar Carchano and Angel Pardo investigate 188 possible cyclical anomalies in S&P 500, DAX and Nikkei index futures contracts (derived from day-of-the-week, month-of-the-year, weekday-of-the-month, week-of-the-month, semi-month, turn-of-the-month, end-of-year, holidays, semi-month-of-the-year, week-of-the-month-of-the-year, Friday the 13th, Halloween effect and quarterly futures expiration). They note that small trading frictions and ease of shorting promote exploitability of anomalies in futures markets. They assume round trip trading frictions of 0.05% for assessing net profitability. Applying tests not dependent on type of return distribution to stock index futures prices from December 1991 through April 2008, they find that: More…
Stock Returns Around Thanksgiving November 18, 2011
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 1950-2010 (61 events), we find that: More…
Stock Market and the National Election Cycle November 7, 2011
Many stock market experts cite the year (1, 2, 3 or 4) of the U.S. presidential term cycle as a useful indicator of U.S. stock market returns. Game theory suggests that presidents deliver bad news immediately after being elected and do everything in their power to create good news just before ensuing biennial elections. Are some presidential term cycle years reliably good or bad? If so, are these abnormal returns concentrated in certain quarters? Finally, what does the stock market do in the period immediately before and after a national election? Using S&P 500 Index data from January 1950 through October 2011 (over 61 years and 15 presidential terms) and focusing on “political quarters” (Feb-Apr, May-Jul, Aug-Oct and Nov-Jan), we find that: More…
“Sell in May” Over the Long Run November 4, 2011
Does the conventional wisdom to “Sell in May” (and “Buy in November”) work over the long run, perhaps due to biological/psychological effects of seasons (such as Seasonal Affective Disorder)? To check, we turn to the very long run data set of Robert Shiller, which offers monthly levels of the S&P Composite Index since 1871. We split the investing year into two half-years (seasons): November through April, and May through October. Using nominal April and October levels for the S&P Composite Index from the end of April 1871 through October 2011 (281 seasons), we find that: More…
VIX Seasonality November 3, 2011
Does the S&P 500 Implied Volatility Index (VIX) exhibit seasonality across calendar months? To check, we calculate the average daily VIX for each month and average the averages by calendar month. For comparison, we also calculate the average daily VIX range (high minus low) and the S&P 500 Index return by month and average by calendar month. Using daily closes of VIX since January 1990, daily VIX highs and lows since October 2003 and monthly closes of the S&P 500 Index since December 1989, all through October 2011, we find that: More…
