Wednesday, March 26, 2008

Calendar market timing model (Halloween indicator)

Here is a well-known strategy for timing the stock market: Sell in May and buy in November. (AKA "Sell in May and go away" & the Halloween indicator)

In their paper entitled "
The Halloween Indicator, 'Sell in May and Go Away': Another Puzzle", Ben Jacobsen and Sven Bouman document this pattern in 36 of 37 global markets studied. This is a very robust timing method that works well in most markets, although researchers are puzzled as to the reason.

Conservative investors could develop a strategy that would simply reduce and increase exposure to stocks via asset allocation in lieu of being 100% or 0% invested.

Novice traders might ask, "Well what happened this year?". The answer is that no strategy works all the time. Good strategies have been proven to work most of the time.

See also:
Quant Investor: Calendar Based Market Timing Model

1 comment:

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