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An Annual Worldwide Optimism Cycle (Sell in May)?

Steve LeCompte | | Posted in: Animal Spirits, Calendar Effects

Guide Calendar Effects Months and seasons

Key Insight

MSCI World (USD) returned an average 7.6% more per year in November–April than May–October, with winter beating summer in about two of three years (1970–2003; monthly data; descriptive, not a trading test).

Does the conventional wisdom to "sell in May," with the average stock return during November-April far exceeding that for May-October, work for the world equity market? If so, why? In the November 2005 version of his paper entitled "The Optimism Cycle: Sell in May", flagged by a reader, Ronald Doeswijk examines the hypothesis that this seasonal pattern derives from an annual optimism cycle. Using monthly return data for markets, sectors and Initial Public Offerings (IPO) over the period 1970 through 2003 (34 years), he concludes that:

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Calendar Effects guide

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All 183 articles in the Calendar Effects guide

Further Reading

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