First of all, for a fresh look at the "sell in May" strategy, click here.  When you look at the myriad ways a handy profit could have been made in the "sell in May" period of the last 13 years, it's almost criminal for brokers, analysts, and commentators to recommend that one stay on the sidelines during this period.  But some do.

Next, we've crunched data for full years beginning in January and ending in December in several ways.  Below, on this page, you'll see the results of compounding yearlong data from 1994 to 2009 (16 periods of one year) and looking for the best general predictors of gains and losses for the next year.  All data is ranked.  Risk-adjusted and non-adjusted data is shown (see our presentation page for more info on ranking and risk-adjustment).

At the bottom of this page you also see several studies where we focused on the S&P 500 index going back to 1987.

For the results of an experiment where the yearlong gains and losses were ranked (in addition to the indicators), look here.  The rationale for ranking the results as well as predictors is explained on the page.

For summaries of market behavior in each year from 1985 through 2007, look here (no risk-adjustment) and here (risk-adjusted).

Finally, for a look at charts of the Dow Index for every three year interval since 1970, look here.  The idea would be to compare the current chart to historical charts, though we don't make any claims that such an approach might or might not be productive.

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Looking to the tables below, one very obvious trend emerges:  cheaply-priced stocks dominate the percentage-gains tables.  The statistical significance is often outrageous.  The question, "Does this dominance represent a long term cycle that is set to reverse in coming years?", must be answered by the individual investor.  Conversely, expensive stocks often find themselves in the loss columns.  Bear in mind that stocks with major single-day gains or losses were tossed from the underlying data to make sure it wouldn't be skewed by stock splits or large dividends.

Given the fact that the stock market has made some nice gains over the period examined, the strategy of simply buying and holding volatile stocks has worked well, as these stocks tend to gain and lose in excess of the general market.  These volatile stocks disappear off the tables after risk-adjustment...we believe these tables offer a better idea as to which stocks might perform best regardless of market conditions.  

Stocks of low market-capitalization have done well on both risk-adjusted and non-adjusted basis.

Stocks with poor performances toward the end of the year also tend to do well in the upcoming year.   

Looking at the S&P 500 tables at the bottom of the page, the results are quite similar.  Note that while the strategy of buying stocks that performed well over the parallel time period in the previous year works shows up as a strong strategy in numerous shorter-term tests on our website, this sort of strategy is a recipe for underperformance on longer-term scales.

 

Date(ymd): 931231 Average Gain: 14.50 Group Stdev: 9.47 Market Focus: 3.9+0.8 (na, 1.68) Market Focus5: 2.5+0.5 The following three rows of data detail the strongest and weakest yearlong strategies over the period 1994 through 2008

Top Gaining Groups 123.86 recent_price 1.00 to 6.00 (1)+ big_vslice 16.00 to 21.00 (4) 120.52 recent_price 1.00 to 6.00 (1)+ vtotal 11.00 to 16.00 (3) 116.79 recent_price 1.00 to 6.00 (1)+ corr_f 1.00 to 5.01 (1) 112.38 recent_price 1.00 to 6.00 (1)+ vskew 21.00 to 26.00 (5) 110.69 recent_price 1.00 to 6.00 (1)+ pskew 31.00 to 36.00 (7) 107.25 vslice97 5.01 to 10.01 (2)+ prcvd_risk 46.00 to 50.01 (10) 106.29 vskew 21.00 to 26.00 (5)+ prcvd_risk 46.00 to 50.01 (10) 105.95 close-low 45.01 to 50.01 (10)+ high_moment 1.00 to 5.01 (1) 105.29 big_vslice 16.00 to 21.00 (4)+ prcvd_risk 46.00 to 50.01 (10) 105.22 recent_price 1.00 to 6.00 (1)+ vslice47 1.00 to 5.01 (1)

Losing Groups -16.42 recent_price 45.01 to 50.01 (10)+ resist3 45.01 to 50.01 (10) -16.39 recent_price 45.01 to 50.01 (10)+ yeargain 45.01 to 50.01 (10) -15.71 recent_price 45.01 to 50.01 (10)+ prd_lastyear 45.01 to 50.01 (10) -14.00 recent_price 40.01 to 45.01 (9)+ resist3 45.01 to 50.01 (10) -13.93 recent_price 40.01 to 45.01 (9)+ prd_lastyear 45.01 to 50.01 (10) -13.91 recent_price 40.01 to 45.01 (9)+ 1monthgain 46.00 to 50.01 (10) -13.81 recent_price 45.01 to 50.01 (10)+ resist1 45.01 to 50.01 (10) -13.42 recent_price 40.01 to 45.01 (9)+ yeargain 45.01 to 50.01 (10) -13.37 prd_lastyear 45.01 to 50.01 (10)+ prcvd_risk 11.00 to 16.00 (3) -13.32 yeargain 45.01 to 50.01 (10)+ prcvd_risk 11.00 to 16.00 (3)

Date(ymd): 931231 Average Gain: 15.01 Group Stdev: 6.69 Market Focus: 8.0+0.9 (0.0813, 0.1733) Market Focus5: 2.8+0.3

Top Gaining Groups 84.66 recent_price 1.00 to 3.00 (1) 74.78 prcvd_risk 49.00 to 50.01 (25) 53.31 prcvd_risk 47.00 to 49.00 (24) 50.57 corr 1.00 to 3.00 (1) 49.35 yeargain 1.00 to 2.01 (1) 48.87 momentum 1.00 to 3.00 (1) 48.84 prd_lastyear 1.00 to 2.01 (1) 46.56 recent_price 3.00 to 5.00 (2) 45.19 prd_3yrs 4.01 to 6.01 (3) 44.96 high_moment 1.00 to 3.00 (1)

Losing Groups -1.03 recent_price 46.01 to 48.01 (24) 2.04 industry 91.08 to 91.80 (22) 2.52 recent_price 31.00 to 33.00 (16) 2.79 recent_price 48.01 to 50.01 (25) 3.25 prcvd_risk 5.00 to 7.00 (3) 3.49 prcvd_risk 2.01 to 5.00 (2) 3.53 recent_price 38.01 to 40.01 (20) 3.71 prcvd_risk 1.00 to 2.01 (1) 4.29 prd_3yrs 49.00 to 50.01 (25) 4.34 industry 91.80 to 94.12 (23)

Date(ymd): 931231 Average Gain: 15.01 Group Stdev: 5.72 Market Focus: 6.4+1.2 (0.00150, 0.0003) Market Focus5: 2.3+0.6

Top Gaining Groups 59.26 recent_price 1.00 to 6.00 (1) 57.51 prcvd_risk 46.00 to 50.01 (10) 37.15 corr 1.00 to 5.01 (1) 37.14 markcap_est 1.00 to 5.01 (1) 35.58 yeargain 1.00 to 6.00 (1) 35.42 prd_lastyear 1.00 to 6.00 (1) 35.16 prd_max 1.00 to 6.00 (1) 35.03 recent_std 46.00 to 50.01 (10) 32.60 open_moment 1.00 to 5.01 (1) 32.59 high_moment 1.00 to 5.01 (1)

Losing Groups 1.99 recent_price 45.01 to 50.01 (10) 3.28 prcvd_risk 1.00 to 6.00 (1) 4.50 recent_price 35.01 to 40.01 (8) 4.70 recent_price 40.01 to 45.01 (9) 5.05 prcvd_risk 6.00 to 11.00 (2) 5.58 recent_price 31.00 to 35.01 (7) 5.66 prd_3yrs 45.01 to 50.01 (10) 6.14 industry 86.98 to 92.40 (9) 6.28 prcvd_risk 11.00 to 16.00 (3) 6.46 prd_3yrs 40.01 to 45.01 (9)

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