Stock Returns During and Between Earnings Seasons

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 for the S&P 500 Index since January 1950 and for the S&P 500 Implied Volatility Index (VIX) since January 1990, both through the last full week of December 2012, we find that: (more…)