Calendar Effects

Is the behavior of the U.S. stock market around exchange holidays consistent enough to generate an aggregate pattern? To investigate, we look at daily S&P 500 Index returns from three trading days before a holiday through three trading days after for the following holidays (adding the Super Bowl) as available since 1950:

New Year’s Day (74 observations, including 2024)
Super Bowl (58 observations, including 2024)
Good Friday (74 observations)
Memorial Day (53 observations)
4th of July (74 observations)
Labor Day (74 observations)
Thanksgiving (74 observations)
Christmas (74 observations)

The total number of observations is 555. Using daily closes of the S&P 500 Index during the specified intervals around holidays, we find that: Keep Reading

Does the seasonal shift marked by the Easter holiday, with the U.S. stock market closed on the preceding Good Friday, 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 1950-2023 (74 events), we find that: Keep Reading

Some stock market experts cite the year (1, 2, 3 or 4) of the U.S. presidential term cycle as a useful indicator of U.S. stock market returns. Game theory suggests that presidents deliver bad news immediately after being elected and do everything in their power to create good news just before ensuing biennial elections. Are some presidential term cycle years reliably good or bad? If so, do abnormal returns concentrate in certain quarters? Finally, what does the stock market do in the period immediately before and after a national election? Using daily and monthly S&P 500 Index levels from January 1928 through Feb 2024 (about 96 years and 24 presidential terms) and focusing on “political quarters” (Feb-Apr, May-Jul, Aug-Oct and Nov-Jan), we find that: Keep Reading

Does iShares 20+ Year Treasury Bond ETF (TLT) exhibit a predictable monthly pattern due to beginning-of-month dividends and mid-month U.S. government consumer and producer inflation releases? To investigate, we calculate average cumulative return for TLT across the month (from trading day 1 through trading day 23). We also investigate exploitability of findings. Using daily raw and dividend-adjusted levels of TLT from the end of July 2002 (inception) through January 2024 (21.5 years), we find that: Keep Reading

“Turn-of-the-Month Effect Persistence and Robustness” indicates that average absolute returns during the turn-of-the-month (TOTM) are strong for both bull and bear markets. Does a strategy of capturing all bull market returns and TOTM returns only during bear markets perform well? To investigate, we apply four strategies to SPDR S&P 500 ETF Trust (SPY) as a tradable proxy for the stock market:

1. SPY – buy and hold SPY.
2. SMA200 – hold SPY (cash) when SPY closes above (below) its 200-day simple moving average (SMA200) the prior day.
3. TOTM – hold SPY from the close five trading days before through the close four trading days after the last trading day of each month and cash at all other times (TOTM).
4. SMA200 or TOTM – hold SPY when SPY closes above its 200-day SMA the prior day and otherwise use the TOTM strategy.

We explore sensitivities of these strategies to a range of one-way SPY-cash switching frictions, with baseline 0.1%. Using daily dividend-adjusted SPY from the end of January 1993 through early January 2024 and contemporaneous 3-month Treasury bill (T-bill) yields as the return on cash, we find that: Keep Reading

Is the Turn-of-the-Month (TOTM) effect, a concentration of relatively strong stock market returns around the turns of calendar months, persistent over time and robust to different market conditions. Does it exist for all calendar months? Does it persist throughout the U.S. political cycle? Does it work for different equity indexes? To investigate, we define TOTM as the interval from the close five trading days before to the close four trading days after the last trading day of the month (a total of eight trading days, centered on the monthly close). Using daily closes for the S&P 500 Index since January 1928 and for the Russell 2000 Index since mid-September 1987, both through early January 2024, we find that: Keep Reading

Does long term data support the belief that “as goes January, so goes the rest of the year” (January is the barometer) for the the U.S. stock market? To investigate, we consider two views of the S&P 500 Index over its full history:

• Correlations between index returns during each calendar month and returns over the next 11 months.
• Index performance during the next 11 months across ranked thirds (terciles) of January returns.

Using monthly closes of the S&P 500 Index from the end of 1927 through 2023 (96 years), we find that: Keep Reading

Are some years of the decade better than others for equity markets? To investigate, we look at average annual returns by year of the decade (xxx0 through xxx9) for the U.S. stock market. Using annual levels of Shiller’s S&P Composite Index for 1871-2023 and the S&P 500 Index for 1928-2023, we find that: Keep Reading

“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

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