Seasonality : study of market behaviour at the start of a quarter

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Tests of Various Strategies

Below is a study of buying stocks at the beginning of January, April, July, and October (the beginning of the quarter for many companies), and selling 10 days later. The best risk-adjusted indicators for the same period in the previous year were used for the current year. Thus, for example, if a low moving average produced maximal gains in January of 2000, we sort our January 2001 data according to moving averages, and see how re-applying that strategy would work in 2001. Industry-based data is excluded from consideration.

We begin in Jan 2000, with our long strategy, short strategy, and the general market holding $1000. At the time of writing, both the long strategy and short strategy have outperformed the general market rather impressively...in a total holding period of about half a year, the long strategy has resulted in a near-doubling of portfolio value, the short strategy is up 30%, while the market in general is up 10%.

Half-month period	Gain/loss via previous year's best strategy	Gain/loss via last year's best short strategy	General market gain/loss
Jan 2000...buy the 4% cheapest stocks, sell the lowest 10% of "stdev"	1094	1004	1011
April 2000...buy the lowest 20-30% of "stdev", sell the lowest 10% of "pave"	1064	1285	911
July 2000...buy the lowest 4% of "gain1", sell the lowest 10% of "high-close"	1227	1251	960
Oct 2000...buy highest 10% of "yeargain", sell highest 10% of "gain1"	1061	1383	895
Jan 2001...buy cheapest 10% of stocks, sell highest 10% of "pskew"	1353	1369	940
Apr 2001...buy the lowest 10% of "stdev", sell the 4% most expensive stocks	1349	1356	948
July 2001...buy the lowest 10% of "gain1", sell the highest 10% of "gain1"	1377	1487	918
Oct 2001...buy lowest 10% of "marketcap", sell lowest 10% of "pave"	1447	1354	992
Jan 2002...buy cheapest 10% of stocks, sell highest 10% of "break_ave"	1510	1398	991
Apr 2002...buy lowest 10% of "mov_ave20", sell highest 4% of "gain1"	1458	1441	995
Jul 2002...buy lowest 10% of "gain1", sell lowest 4% of "break_ave"	1367	1548	890
Oct 2002...buy lowest 4% of "mov_ave100", sell lowest 10% of "vstdev"	1273	1600	887
Jan 2003...buy cheapest 10% of stocks, sell 10% most expensive stocks	1444	1578	924
April 2003...buy lowest 10% of "stdev", sell lowest 10% of "break_ave"	1477	1492	962
July 2003...buy lowest 10% "3monthgain", sell lowest 10% "stdev"	1569	1456	1023
Oct 2003...buy highest 10% "marketcap", sell lowest 10% "high-close"	1696	1384	1111
Jan 2004...buy highest 10% "vstdev", sell lowest 10% "t_vratio"	1887	1354	1159
April 2004...buy 40-50% "momentum", sell highest 10% "momentum"	1864	1358	1145
July 2004...buy lowest 10% "gain1", sell 30-40% "3monthgain"	1745	1412	1091
Oct 2004...buy big_pslice[10], sell vave[10]	1727	1432	1080
Jan 2005...buy prd_lastyear[10], sell std[1]	1587	1473	1026
April 2005...buy gain1[4], sell big_pslice[1]	1534	1516	991
July 2005...buy prd_lastyear[1], sell prd_lastyear[10]	1667	1458	1034
Oct 2005..buy stock_ind[8], sell big_vslice[7]	1593	1523	984
Jan 2006...buy corr[1], sell corr[10]	1673	1440	1024
Apr 2006...buy close-low[1], sell break_ave[2]	1653	1485	1000
July 2006...buy prd_lastyear[1], sell resist2[10]	1546	1618	940
Oct 2006...buy 3month_gain[1], sell stdev[1]	1643	1581	982
Jan 2007...buy 3monthgain[2], sell vtotal[1]	1655	1574	988
Apr 2007...buy vave[1], sell Dividend[10]	1715	1540	1022
Jul 2007...buy recent_std[1], sell mov_ave20[8]	1737	1503	1038
Oct 2007...buy gain1[1], sell stdev[10]	1806	1469	1074
Jan 2008...buy prcvd_risk[1], sell marketcap[2]	1705	1616	970
Apr 2008...buy break_ave[7], sell stdev[10]	1693	1601	964
Jul 2008...buy prcvd_risk[1], sell marketcap[1]	1631	1689	908