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.
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…
Does the Sunspot Cycle Predict Energy and Grain Prices? October 24, 2011
As a follow-up to “Sunspot Cycle and Stock Returns” reader asked: “Sunspot activity does have a direct relationship to weather. Could one speculate on the natural gas market or the agriculture market using the sunspot cycles?” Using monthly averages of daily sunspot counts from the Solar Influences Data Analysis Center and monthly U.S. wheat prices for September 1928 through August 2011 (996 months) and monthly U.S. wellhead natural gas prices for January 1976 through July 2011 (427 months), we find that: More…
Sunspot Cycle and Stock Returns October 21, 2011
A reader asked: “Have you had the opportunity to evaluate Charles Nenner as an equity and commodities forecaster?” Charles Nenner is self-described as “the talk of Wall Street since accurately predicting some of the biggest moves in the Markets over the past few years.” In his July 2007 discussion of the “Nenner Methodology at the Bloomberg Studio”, Charles Nenner cites sunspot activity as a specific key indicator for equity returns. Is there any reliable relationship between sunspot activity and stock market returns? Using monthly averages of daily sunspot counts from the Solar Influences Data Analysis Center and monthly closing levels of the Dow Jones Industrial Average (DJIA) for September 1928 through September 2011 (997 months) and the S&P 500 Index for January 1950 through September 2011 (741 months), we find that: More…
Lunar Cycle and Stock Returns October 13, 2011
Does the lunar cycle affect the behavior of investors/traders, and thereby influence stock returns? In the August 2001 version of their paper entitled “Lunar Cycle Effects in Stock Returns” Ilia Dichev and Troy Janes conclude that: “returns in the 15 days around new moon dates are about double the returns in the 15 days around full moon dates. This pattern of returns is pervasive; we find it for all major U.S. stock indexes over the last 100 years and for nearly all major stock indexes of 24 other countries over the last 30 years.” To refine this conclusion and test some recent data, we examine U.S. stock returns during intervals relative to the dates of new and full moons since 1990. When the date of a new or full moon falls on a non-trading day, we assign it to the nearest trading day. Using dates for new and full moons for January 1990 through September 2011 as listed by the U.S. Naval Observatory (269 full and 269 new moons) and contemporaneous daily closing prices for the S&P 500 Index, we find that: More…
Stock Returns During and Between Earnings Seasons October 11, 2011
A reader proposed the following stock market timing strategy based on a strictly calendar-based definition of earnings season: go short (long) the market at the close at the end of the first full week (sixth full week) of each calendar quarter, representing the beginning (end) of earnings season. The hypothesis is that the broad stock market performs poorly during earnings season and well outside of earnings season. Using weekly closes of the S&P 500 Index as a proxy for the U.S. stock market from the beginning of 1950 through 10/7/11 and of SPDR S&P 500 (SPY) and ProShares Short S&P500 (SH) for 6/23/06 (inception of the latter) through 10/7/11, we find that: More…
First and Last Hours of Trading October 4, 2011
Do U.S. stock market returns during the first and last hours of normal trading days reliably indicate what comes next? To investigate, we analyze average SPDR S&P 500 (SPY) returns during 9:30-10:30, 9:30-15:00, 9:30-16:00 and 15:00-16:00 for normal trading days during 2007 (bullish year) and 2008 (bearish year). Using a sample of SPY one-minute prices spanning 2007-2008, we find that: More…
Any Seasonality for Gold or Gold Miners? October 3, 2011
Do gold and gold mining stocks exhibit seasonality? Since exchange-traded funds for gold and gold miners are very young, the spot price of gold and mining indexes offer more reliable inference. However, spot gold prices are informative only as far back as 1968, because: “On March 17, 1968, the price of gold on the private market was allowed to fluctuate [, and] in 1975 the price of gold was left to find its free-market level.” Using monthly levels of the spot price of gold in dollars per ounce and the S&P 500 Index during February 1968 through September 2011, PHLX Gold/Silver Sector (XAU) during December 1983 through September 2011, AMEX Gold Bugs Index (HUI) during June 1996 through September 2011 and SPDR Gold Shares (GLD) during November 2004 through September 2011, we find that: More…
Intraday U.S. Stock Market Behavior October 3, 2011
Does the U.S. stock market exhibit predictable return and volatility patterns during the trading day? To investigate, we analyze one-minute prices for SPDR S&P 500 (SPY) over two recent years. Specifically, we calculate average cumulative return, average returns for 15-minute intervals and average standard deviation of one-minute returns during 15-minute intervals over the trading day during each of 2007 (bullish year) and 2008 (bearish year). Using a sample of SPY one-minute prices for 9:30-16:15 spanning 2007-2008 (over 203,000 observations), we find that: More…
Simple Tests of Sy Harding’s Seasonal Timing Strategy Last Updated: September 20, 2011
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 151% during 1999-2010, compared to 56% for the DJIA itself. As a robustness test, we apply this strategy to the S&P Depository Receipts Trust (SPY) exchange-traded fund since its inception. Using daily dividend-adjusted closing prices for SPY and the daily 13-week Treasury bill (T-bill) yield from 1/29/93 (the earliest available for SPY) through 9/9/11, we find that: More…
Stock Returns Around Labor Day August 26, 2011
Does the Labor Day holiday, marking the end of summer vacations, signal any unusual return effects by refocusing U.S. stock investors on managing their portfolios? By its definition, this holiday brings with it any effects from three-day weekends and the turn of the month. To investigate the possibility of short-term effects on stock market returns around Labor 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 1950-2010 (61 observations), we find that: More…
