A promising timing strategy in equity markets
Citation:
Lucey, Brian M. and Whelan, Shane F. 'A promising timing strategy in equity markets'. - Dublin: Journal of the Statistical and Social Inquiry Society of Ireland,Vol. XXXI, 2001/2002, pp74-110Download Item:
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Abstract:
In a working paper, Jacobsen and Bouman (2001) claim that that the old
stock market saying of ?sell in May and go away but buy back by St. Leger Day?
produces statistically significant profit when tested on a large database of equity
market returns over the last decade, three decades, and even longer periods. In a
recently published paper, Sullivan, Timmerman and White (2001) dismissed the
statistical significance of this or any other calendar-based trading rule, attributing the
reported test results to a large data mining exercise of the academic and financial
communities. In this paper, we provide an out-of-sample test on the Bouman and
Jacobsen strategy and conclude that the reported results are indeed statistically
significant. In doing so we reintroduce a reliable index of capital returns on the Irish
equity market maintained contemporaneously by the Irish Central Statistical Office
(and its forerunner) since January 1934 which, in its early decades, displays
markedly different statistical properties to both the US and UK equity markets of
that time and equity market returns generally in recent decades. As a subsidiary
exercise we reconsider the extensive literature on monthly seasonality in equity
markets with this novel index. It is contended that the abnormally high returns
frequently reported in January and April and occasionally in February and other
months are perhaps more accurately and certainly more parsimoniously ascribed to
the half-year effect captured in the old stock market adage.
Description:
Read before the Society, 4 December 2001
Author: LUCEY, BRIAN MICHAEL; Whelan, Shane F.
Publisher:
Statistical and Social Inquiry Society of IrelandType of material:
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Journal of the Statistical and Social Inquiry Society of IrelandVol. XXXI 2001/2002
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