Calendar anomalies (2/3) - Anomaly list

main articles Jun 23, 2021

A calendar effect (or calendar anomaly) is a repetitive behavior of a financial market which appears to be related to the calendar, such as holidays, the day of the week, time of the month, time of the year, etc.

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[ForecastCycles] Trading Strategy on Calendar Anomalies

The list of the Strategies, based on Calendar Anomalies, available on Forecastcycles:

Halloween effect (HAL and HAL_others): also known as “Sell in May and go away” is a market-timing strategy based on the hypothesis that stocks perform better between Nov. 1st (Halloween) and Apr. 30th, than from May to October.
Turn of the Month effect (TOM): Lakonishok and Smidt (1987) noted that the S&P performance in the 4 days around the end of the month was 0.473%, which is 7.7 times bigger than the average of returns over a period of 4 days of S&P. This is one of the strongest calendar anomalies known.
Within the Month (WTM): A behavior of a financial instrument is also studied ‘within the month’, by splitting of the month in multiple parts and measuring the returns in each one. A possible explanation of this anomaly (and not only) is the irregularity of capital inflows in a market which affect asset returns.
Holiday’s effect (HOL): Interesting periods to be studied are the days that precede and follow public holidays, such as Christmas and New Year. In fact, days preceding holidays are generally associated to a positive mood, which cause a greater propension to risk. Instead, the days following holidays are generally associated to a negative mood and so more aversion to take risks. This is one of the most robust market anomalies that I know.
Day of the Week effect (TDW, TDW_ovn and TDW_multi): The discretion of whether buy or sell an instrument will be purely given by the day of the week (Monday = 1, Sunday = 7).
Month of the Year effect (MOY and MOY_multi): these strategies enters in the market at the beginning of a month (1: January, 12: December) and close the position at the end of the same month (MOY) or at the end of a following month (MOY_multi).
Week of the Year effect (WOY): the calendar year is splitted into 52 weeks and it is analyzed the return in each week.
Within the Year effect (WTY or Max-Min): there can be a positive period of a year that goes beyond a period of one single month. Every financial instrument can have a different timespan in which its returns are significantly positive or negative. For example, Nikkei can be strong from half of March to the end of June while Copper can be weak from the start of October to the half of December.
January Barometer (JB): Some research argues, regarding S&P 500, that a positive January is usually associated to a positive year, instead a negative January is a predictor of a negative year.
First Day of the Quarter effect (FDQ): these strategies enters in the market at the beginning of each quarter: the 1st of Jan, Mar, Jul, Sep and keep the position open for N days.
Lunar Cycle effect (Moon): As moon influences natural events, it can be studied whether moon phases influence human mood and financial markets.
Option Expiration effect (OE): The options expiration day and the preceding days are important dates for each market as option sellers and buyers strive to push the price in their favor when options expire, which often causes specific price moves.