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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.

Growing Political Effect?

“Seasonal Strategy for QQQ?” finds an interesting even year-odd year effect in Invesco QQQ Trust (QQQ) annual returns. The Trading Calendar and “Monthly Returns During Presidential and Congressional Election Years” find notable differences in S&P 500 Index performances for even years and odd years. A plausible culprit is federal elections. Is this effect growing over time? To investigate, we look at four indexes over their full histories:

  1. Shiller’s S&P Composite Index during 1871 through 2023 (152 annual returns).
  2. The S&P 500 Index during 1927 through 2023 (96 returns).
  3. The NASDAQ 100 Index during 1985 through 2023 (38 returns).
  4. The Russell 200 Index during 1987 through 2023 (36 returns).

For each index, we calculate annual returns for even years and odd years and look at the separate trends in these returns over time. Using the selected end-of-year index levels, we find that: Keep Reading

U.S. Stock Market Performance by Intra-year Phase

The full-year Trading Calendar indicates that the U.S. stock market has three phases over the calendar year, corresponding 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 return variabilities for these phases? Using daily S&P 500 Index closes from the end of December 1927 through December 2023, we find that: Keep Reading

Stock Returns Around New Year’s Day

Does the New Year’s Day holiday, a time of replanning and income tax positioning, systematically affect investors in a way that translates into U.S. stock market 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 around New Year’s Day for 1951-2023 (73 observations), we find that: Keep Reading

Stock Returns Around Christmas

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 five trading days before through five trading days after the holiday. Using daily closing levels of the S&P 500 Index for 1950-2022 (73 events), we find that: Keep Reading

U.S. Stock Market Returns Around Thanksgiving

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 1950-2022 (73 events), we find that: Keep Reading

Seasonal SACEVS-SACEMS Strategy?

A subscriber requested testing of a strategy that holds a combination of 50% Simple Asset Class ETF Value Strategy (SACEVS) Best Value and 50% Simple Asset Class ETF Momentum Strategy (SACEMS) equal-weighted (EW) Top 2 strategies during November through April and idle cash during May through October. We consider three strategies:

  1. Best Value – EW Top 2 – hold Best Value-EW Top 2 during all months.
  2. Best Value – EW Top 2 Seasonal (Idle Cash) – hold Best Value-EW Top 2 during November through April and idle cash during May through October, as requested.
  3. Best Value – EW Top 2 Seasonal (6-month T-bill) – hold Best Value-EW Top 2 during November through April and 6-month U.S. Treasury bills (T-bill) bought at the beginning May each year during May through October.

We run annual statistics for each variation as in “Combined Value-Momentum Strategy (SACEVS-SACEMS)”. Annualized returns are compound annual growth rates. Maximum drawdown is the deepest peak-to-trough drawdown for these strategies based on monthly measurements over the sample period. For Sharpe ratio, to calculate excess annual return, we use average monthly yield on 3-month Treasury bills during a year as the risk-free rate for that year. Using monthly returns for SACEVS Best Value and SACEMS EW Top 2 and the specified T-bill yield during July 2006 through October 2023, we find that: Keep Reading

Seasonal Strategy for QQQ?

A subscriber requested a test of holding Invesco QQQ Trust (QQQ) during November through April and idle cash during May through October. Informed by the Trading Calendar, we consider four strategies:

  1. QQQ – buy and hold QQQ.
  2. QQQ Seasonal (Idle Cash) – hold QQQ during November through April and idle cash during May through October, as requested.
  3. QQQ No-even (Idle Cash) – hold QQQ during odd years and idle cash during even years (avoiding stocks during years with U.S. federal elections).
  4. QQQ No-even (1-year T-note) – hold QQQ during odd years and 1-year U.S. Treasury notes (T-note) bought at the beginning of the year during even years.

We consider average monthly return, standard deviation of monthly returns, monthly reward/risk (average return divided by standard deviation), compound annual growth rate (CAGR) and maximum drawdown (MaxDD). We ignore frictions and tax implications of trading once or twice a year. Using monthly dividend-adjusted returns for QQQ during March 1999 (inception) through October 2023, we find that: Keep Reading

Monthly Returns During Presidential and Congressional Election Years

Do hopes and fears of U.S. election outcomes, and associated political machinations, alter the “normal” seasonal variation in monthly stock market returns? To check, we compare average returns and variabilities (standard deviations of returns) by calendar month for the S&P 500 Index during years with and without quadrennial U.S. presidential elections and biennial congressional elections. Using monthly S&P 500 Index closes over the period December 1927 through September 2023 (nearly 96 years), we find that: Keep Reading

Asset Class ETF Seasonalities?

Do exchange-traded funds (ETF) that track asset classes, such as those used in the Simple Asset Class ETF Momentum Strategy (SACEMS) and the Simple Asset Class ETF Value Strategy (SACEVS), exhibit reliable seasonalities? To check, we look at average return by calendar month for the following nine ETFs:

  • SPDR S&P 500 ETF Trust (SPY)
  • iShares Russell 2000 Index (IWM)
  • iShares MSCI EAFE Index (EFA)
  • iShares MSCI Emerging Markets Index (EEM)
  • iShares Barclays 20+ Year Treasury Bond ETF (TLT)
  • iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)
  • Vanguard Real Estate Index Fund (VNQ)
  • SPDR Gold Shares (GLD)
  • Invesco DB Commodity Index Tracking Fund (DBC)

Using monthly dividend-adjusted returns for these ETFs over a common sample period during March 2006 (limited by DBC) through August 2023, we find that: Keep Reading

Stock Market Returns Around Labor Day

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 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 through 2022 (73 observations), we find that: Keep Reading

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