Market's Seasonal Patterns in Global Markets! October, 2012.

Over the years we've covered the remarkable long-term consistency of annual seasonality in the U.S. market very thoroughly.

But about all we've said about seasonal patterns in global markets is that our research shows that global markets tend to move in tandem with each other, so that when the U.S. is in a correction or rally, or a bull or bear market, other global markets tend to be in the same cycle.

And we have reported that independent academic studies have confirmed that the pattern also persists in most global markets.

One academic study we have referred to several times is a 27-page study by Professor Ben Jacobsen, of the Rotterdam School of Management, Rotterdam, The Netherlands, and Sven Bouman of Aegon Asset Management, in the Hague, Netherlands, published in the American Economic Review in 2002, which concludes, “Surprisingly we found this inherited wisdom of Sell in May to be true in 36 of 37 developed and emerging markets. Evidence shows that in the UK the seasonal effect has been noticeable since 1694.”

The Jacobsen study also noted that, “A trading strategy based on this anomaly would be highly profitable in many countries. The annual risk-adjusted outperformance ranges between 1.5% and 8.9%, depending on the country being considered. The effect is robust over time, economically significant, unlikely to be caused by data-mining, and not related to taking excess risk.”

 Now we have more definitive evidence in a new study by Sandro Andrade, Vighi Chhaochharia, and Michael Fuerst of the University of Miami, School of Business, and published by the Social Science Research Network.

The study begins with the Abstract:

"In this study we perform an out-of-sample test of the Sell in May effect studied by Bouman and Jacobsen (American Economic Review, 2002). Surprising to us, the old adage "Sell in May and Go Away" remains good advice. Reducing equity exposure starting in May and levering it up starting in November persists in being a profitable market timing strategy. The economic magnitude of the effect shows up in both the in-sample and out-of-sample data. On average, stock returns are about 10 percentage points higher in November to April semesters than in May to October semesters."

Okay. But, we already knew that from our own research and other academic studies that have been published over the years.

However, here is where this study adds to the knowledge:

"In 2002, Bouman and Jacobsen studied 37 global markets and found higher returns in 35 of those markets during the November to April semester from 1970-1998, as compared to the May to October semester. Here we study the out-of-sample 1998-2012 period of those 37 equity markets."

By 'out-of-sample' they mean the period of 1998 - 2012 that followed the period that was included in the Bouman and Jacobsen study.

More excerpts:

"The Bouman and Jacobsen data began in 1970 for 18 of the countries, and in 1988 for 19 countries. We compute returns to adjacent 6-month periods using May 1 and November 1 as the starting points" [as did Bouman and Jacobsen, and which are the month-end dates referred to by the phrase 'Sell in May and Go Away'].

Skipping down through pages of the academic descriptions of regression analysis and formulae by which the data was gathered and compiled, and the proofs of the research, we come to the meat of the study, tables of the country by country results.

There are two separate tables. The first is for the countries for which the original Bouman and Jacobsen study had data from 1970, and the second table is for countries where data was only available from 1988. In both tables, the results are in two segments, covering the same period as in the 2002 Bouman and Jacobsen study which ended with the year 1998, in which the new study confirms the previous findings of Bouman and Jacobsen, and a segment in the right-hand section of each table that shows the seasonal performance for each country from 1998-2012, the period after the original study ended.

Country by Country results:

Table 1, countries where data was available from 1970.

  1970 - 1998   1998 - 2012
Country May - Oct Nov - May   May - Oct Nov - May
Australia +3.56% +9.61%   +2.37% +6.55%
Austria 0.00% +10.53%   -3.14% +9.67%  
Belgium +0.61% +16.12%   -0.91% +4.39%
Canada +2.49% +9.78%   +1.37% +8.08%
Denmark +7.04% +9.20%   +1.20% +10.26%
France +0.30% +15.97%   -1.33% +5.99%
Germany +1.22% +10.74%   -2.70% +8.30%
Hong Kong +10.83% +13.61%   +3.27% +8.68%
Italy -0.32% +16.4%   -3.97% +5.07%
Japan -0.03% +11.16%   -4.53% +6.13%
Netherlands +1.56% +14.52%   -2.35% +6.43%
Norway +3.69% +12.19%   +2.39% +9.95%
Singapore +1.59% +12.50%   +3.17% +10.26%
Spain +1.98% +14.89%   +0.84% +3.96%
Sweden +2.94% +18.75%   -2.42% +14.01%
Switzerland +2.19% +10.08%   -1.12% +4.49%
United Kingdom +2.00% +16.34%   -0.59% +5.42%
United States +3.84% +10.08%   -1.03% +5.83%


Table 2, countries where data was available only from 1988.


  1988 - 1998   1998 - 2012
Country May - Oct Nov - May   May - Oct Nov - May
Argentina +293.57% +97.55%   +7.58% +15.99%
Brazil +143.31% +259.77%   +6.92% +17.37%  
Chile +12.08% +24.15%   +7.27% +9.89%
Finland +3.72% +17.49%   -3.70% +12.66%
Greece +7.74% +28.89%   -2.97% +0.27%
Indonesia +5.33% +22.2%   +7.83% +23.73%
Ireland +1.03% +16.04%   -10.03% +7.85%
Jordan +0.07% +7.93%   +2.93% +7.35%
S. Korea -0.44% +1.88%   +1.17% +21.43%
Malaysia -1.21% +8.83%   +3.67% +13.74%
Mexico +21.21% +22.29%   +5.85% +14.24%
New Zealand +4.90% +1.66%   -1.38% +7.68%
Philippines +7.24% +16.03%   +3.16% +8.11%
Portugal +2.28% +13.68%   -2.60% +3.12%
Russia +15.22% +33.35%   +3.10% +28.99%
South Africa -2.76% +17.29%   +6.33% +11.68%
Taiwan -5.15% +21.37%   -1.80% +8.46%
Thailand +0.78% +6.21%   +2.87% +16.34%
Turkey +45.96% +54.05%   +8.59% +33.32%

Seasonality obviously is a major factor in almost all global markets as well as in the U.S. market.

Note that this study is of the basic Sell in May and Go Away seasonality, of buying on November 1 each year and selling on May 1 each year, and does not cover our Seasonal Timing Strategy, which uses more closely defined calendar dates than simply the first day of the month, and by using MACD as a trigger when the seasonal date arrives, results in the seasons varying from 4 to 7 months in length (depending on what is going on each year in the way of market rallies or corrections when the calendar dates arrive).

And a word of caution:

As we say regarding the proofs of the consistency of seasonality in the U.S. market, do not be fooled by what looks like very small declines on average over the long-term in the unfavorable seasons, which would look to be easy to hold through, so why bother exiting for the unfavorable seasons.

 Those are averages over a long period, and so don't show the individual unfavorable seasons that make up the average, some of which had declines of as much as 36% in the U.S. as shown in our STS table of the performance in individual years, and even more in other countries. 




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Sy Harding is president of Asset Management Research Corp, and editor of, and the free market blog,

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