Seasonality in Markets

[Sugar Dunkaton]

Has anyone done any research into the effects of seasonality in the equity markets.

I have heard around the traps in various newsletters here and there that certain months perform better than others. I would be interested from both a volume and performance point of view.

Is there anywhere that anyone knows that has a good collection of statistics relating to seasonality?

Thanks

 

[wayneL]

Has anyone done any research into the effects of seasonality in the equity markets.

I have heard around the traps in various newsletters here and there that certain months perform better than others. I would be interested from both a volume and performance point of view.

Is there anywhere that anyone knows that has a good collection of statistics relating to seasonality?

Thanks

I use stats/seasonality for option trades, but one thing to note with seasonal tendencies, especially in equity markets, is that it can go spectacularly wrong; i.e. violently against the seasonality.

Any plan to use seasonal tendencies must recognise this and have an @ss covering protocol in place.

 

[MRC & Co]

Yeh, Wayne is right, seasonality (particularly in equity markets) has to be taken into account with the context of the current environment.

You also have to look at the seasonality for yourself. For example "sell in May and go away" doesn't really hold true. It's more "sell in June and July and go away" - but I guess that one doesn't ring as well.

 

[skc]

Seasonality in agricultural commodity futures make some sense to me, but that's probably as much to do with fundamental analysis then seasonality.

On ASX the dividend payout of large banks play a role, similarly end of tax year. But they cannot be traded on their own as already pointed out.

Yeh, Wayne is right, seasonality (particularly in equity markets) has to be taken into account with the context of the current environment.

You also have to look at the seasonality for yourself. For example "sell in May and go away" doesn't really hold true. It's more "sell in June and July and go away" - but I guess that one doesn't ring as well.

Sell in June and you will be over the moon...

 

[sinner]

Here is a presentation that includes a list of "Seasonality Picks" for US stocks/ETFs based on US seasonality data.

http://www.tlforum.com/2010manuals/manuals/JohnPerson.pdf

For example, buy Heating Oil futures at the start of Winter (not listed in the above PDF just an example I pulled out of my head) because more homes will be heated over the coming 3 months.

I don't advice you use the picks for yourself, as they will be based on the seasonality of another country. The above is posted so you can get a working example of seasonality.

As mentioned in the presentation, seasonality goes hand in hand with sector rotation. You need to incorporate both concepts to use either successfully, IMHO.

 

[wayneL]

Key phrase => Maximum Adverse Excursion.

Study this with relation to seasonals.

 

[Bort]

I've worked with seasonality in asx100 and asx200 stocks.

Following seasonal results with no risk management can lead to large drawdown or maximum adverse excursion. Most entry strategies without a thought of loss limitation will. Obvious to say.

A pure trader of price need not know why such seasonality exists more so that one has a means of catching it.

Insert Van Tharp on beliefs about the market and seasonality in stocks can work for you.

Always looking for more caveats or discussion in this area.