Calendar Effects

Does the Memorial Day holiday signal any unusual return effects? By its definition, this holiday brings with it any effects from three-day weekends and sometimes the turn of the month. Prior to 1971, the U.S. celebrated Memorial Day on May 30. Effective in 1971, Memorial Day became the last Monday in May. To investigate the possibility of short-term effects on stock market returns around Memorial 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…

A reader asked whether oil prices exhibit seasonality. To check, we investigate three monthly series: (1) spot prices for West Texas Intermediate (WTI) Cushing, Oklahoma crude oil since the beginning of 1986 (25+ years); (2) nearest expiration futures prices for this same crude oil since April 1983 (28 years); and, (3) and prices for the iPath S&P GSCI Crude Oil TR Index exchange-traded notes (OIL) since September 2006 (only 4+ years). Using monthly prices from the respective inception months through April 2011, we find that: More…

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 April 2011, we find that: More…

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 1950-2010 (61 events), we find that: More…

Three 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 more than twice as long as that cited. Using these earnings release dates, daily dividend-adjusted closes for S&P 500 SPDR (SPY) as a proxy for the broad stock market and the daily 13-week Treasury bill (T-bill) yields over the period 2/25/97 through 4/11/11 (57 quarters), we find that: More…

Are there reliable ways to exploit differences in asset class returns under Democratic and Republican U.S. presidents? In his April 2011 paper entitled “Is the 60-40 Stock-Bond Pension Fund Rule Wise?”, William Ziemba examines relationships between the U.S. presidential election cycle and long-run returns for several asset classes. Specifically, he investigates the differential performance of large capitalization stocks, small capitalization stocks and bonds when Democrats and Republicans hold the presidency. Using annual asset class return data for 1998 through 2010 to extend prior calculations for 1937-1997 and 1942-1997, he finds that:

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Does the U.S. stock market offer a predictable pattern of returns around the ends of calendar quarters? Do funds deploy cash to bid stocks up at quarter ends to boost portfolio values at the end of reporting periods (with subsequent reversals)? Or, do they sell stocks to raise cash for fund redemptions? Is the end-of-quarter effect the same as the turn-of-the-month effect? To investigate, we examine average daily stock market returns from 10 trading days before to 10 trading days after the ends of calendar quarters. We also compare these returns to those for turns of calendar months. Using daily closes for the S&P 500 Index for January 1950 through March 2011, we find that: More…

In an August 2004 article entitled “Time is Right for These 7 Biotechs” (apparently no longer available on MSN Money), Jim Jubak states: “…in most years, biotechs decline in the spring as investors anticipate a summer hiatus in the conferences where new clinical results are announced. They rally in the fall as the conference schedule and the volume of news increases.” Does empirical data support belief in these observations? To check, we examine the behavior of the AMEX Biotechnology Index (BTK) across the calendar year. Using monthly closing levels for BTK from its inception in January 1995 through January 2011 (just over 16 years), and contemporaneous monthly returns for the S&P 500 Index for detrending, we find that: More…

In their February 2011 book chapter entitled “Seasonal Anomalies”, Constantine Dzhabarov and William Ziemba describe, update and assess several published U.S. stock market anomalies, most of which are directly or indirectly calendar-driven. They update using returns for stock index futures as a low-friction approach to exploiting calendar anomalies. They acknowledge the possible materiality of data mining/snooping bias in past findings and the difficulty of proving statistical significance even in large samples due to high return variability. Using returns for S&P 500 Index and Russell 2000 Index futures from February 1993 through December 2010 to update analyses of these anomalies, they find that: More…

Are there any stock market return anomalies around the equity option expiration (OE) date (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 market returns from five trading days before to five trading days after OE. Using daily closing prices for the S&P 500 Index for January 1990 through January 2011 (252 OEs, with September 2001 excluded due to trading disruption), we find that: More…