'Sell in May...' aka 'The Halloween effect'

[DiamondEcho]

I found this interesting, I hadn't realised how global this observation is. The paper's authors look at seemingly every stock exchange in the world, all us all the respective exchange data available - that's 1692 for London.

'The Halloween Indicator, 'Sell in May and Go Away': Everywhere and All the Time
Date Written: October 1, 2018

Abstract
To answer the sceptics, we use all historical data (62962 observations) on all stock market indices worldwide to verify the robustness of the so-called Halloween Indicator or Sell in May effect. The effect seems remarkably robust with returns on average 4% higher during November-April period than during May-October. A new test for the effect offers some additional insights. Worldwide excess returns during summer seem negative (around -1%) and often significantly so suggesting a flat or negative risk return relation. Only for Mauritius do we find a significantly positive risk return relation during May-October. Our dataset also allows for a new (upper bound) estimate for the equity premium of around 4%.
https://papers.ssrn.com/sol3/papers.cfm ... id=2154873

It's 78 pages long [opened in-browser]. Per page 36, 6Mo average return on the LSE Nov-April = 4.6%, May-Oct = 2.0%

[BusyBumbleBee]

Summer in the southern hemisphere is in winter here - Mauritius last time I looked was n the southern hemisphere.

[TheMotorcycleBoy]

Interestingly our FTSE100 did indeed peak slightly in late-ish May, and almost rose to a similar peak in the start of August.

But forget about that, tell me, UK equity veterans....what's the cheapest time to buy?

Not that I'm in the slightest bit interested in timing the market, of course

[Itsallaguess]

But forget about that, tell me, UK equity veterans....what's the cheapest time to buy?

Usually when you absolutely don't want to put any more capital into a scary-looking market....

Cheers,

Itsallaguess

[TheMotorcycleBoy]

But forget about that, tell me, UK equity veterans....what's the cheapest time to buy?

Usually when you absolutely don't want to put any more capital into a scary-looking market....

Cheers,

Itsallaguess

Ha ha! You guys don't give away your secrets too easily!!

[tjh290633]

Interestingly our FTSE100 did indeed peak slightly in late-ish May, and almost rose to a similar peak in the start of August.

But forget about that, tell me, UK equity veterans....what's the cheapest time to buy?

Not that I'm in the slightest bit interested in timing the market, of course

You must have heard the mantra: "The time to buy is now".

TJH

[Ashfordian]

But forget about that, tell me, UK equity veterans....what's the cheapest time to buy?

Usually when you absolutely don't want to put any more capital into a scary-looking market....

Cheers,

Itsallaguess

Ha ha! You guys don't give away your secrets too easily!!

It's no secret. You have to live and experience it, probably a couple of times before you appreciate the wisdom in that answer.

It takes experience to deliver on this though as I am sure we have all run with the herd like sheep when in hindsight we should have gone in the opposite direction.

[TheMotorcycleBoy]

Interestingly our FTSE100 did indeed peak slightly in late-ish May, and almost rose to a similar peak in the start of August.

But forget about that, tell me, UK equity veterans....what's the cheapest time to buy?

Not that I'm in the slightest bit interested in timing the market, of course

You must have heard the mantra: "The time to buy is now".

TJH

No....only "caveat emptor"

[BrummieDave]

But forget about that, tell me, UK equity veterans....what's the cheapest time to buy?

Well, when I was building my pot by automated monthly purchases of passive trackers, I bought on the 28th (or closest trading day) of every month because I was told, on TMF I think, that historically and statistically it's the cheapest day to buy equities due to it coinciding with the date that large institutions such as pension funds withdraw their cash to meet monthly obligations, hence driving a slight dip in the price of equities.

I can't say I noticed though...

[TheMotorcycleBoy]

But forget about that, tell me, UK equity veterans....what's the cheapest time to buy?

Usually when you absolutely don't want to put any more capital into a scary-looking market....

Cheers,

Itsallaguess

You all missed the point of my original question......sorry I was not particularly direct, however it was germane to the thread's title. So I'll rephrase it

But forget about that, tell me, UK equity veterans....what's the cheapest time to buy with regard to months of the year?

PS Replies that involve TheMotorcycleBoy needing to gain more experience are unacceptable.
PPS On a more serious note, despite seasonal/cyclical fluctuations, surely the main purchasers a pension funds? Which must buy all year round...

[Itsallaguess]

You all missed the point of my original question......sorry I was not particularly direct, however it was germane to the thread's title. So I'll rephrase it

But forget about that, tell me, UK equity veterans....what's the cheapest time to buy with regard to months of the year?

Think about what you're asking...

If anything like that actually ever existed, it would simply be arbitraged out of existence almost as soon as it was recognised......

Cheers,

Itsallaguess

[mc2fool]

But forget about that, tell me, UK equity veterans....what's the cheapest time to buy with regard to months of the year?

Statistically, now, but that doesn't mean it'll be so this year, or next, or the year after or ...

Chris Dillow writes in the IC this week on the OP paper. https://www.investorschronicle.co.uk/comment/2018/10/25/the-halloween-signal/

PPS On a more serious note, despite seasonal/cyclical fluctuations, surely the main purchasers a pension funds? Which must buy all year round...

Pension funds only hold 3% of the UK market. The biggest chunk, at 53.9%, is foreign held, with 48.1% of that (i.e. 25.9% of the total) being held in North American. The next biggest chunk, at 12.3%, is held by UK individuals.

https://www.ons.gov.uk/economy/investmentspensionsandtrusts/bulletins/ownershipofukquotedshares/2016

[doug2500]

Usually when you absolutely don't want to put any more capital into a scary-looking market....

Cheers,

Itsallaguess

Well maybe it's experience coming to the fore but for me this was when the 100 was at 7700. That's when I was reluctant to put more capital to work.

I'm a bit more comfortable now, but it's still hard with so much volatility.

To answer the question asked, IMO either do a bit of market timing but accept it's not a monthly thing but pretty random, or now is the time (as previously suggested)

[TheMotorcycleBoy]

But forget about that, tell me, UK equity veterans....what's the cheapest time to buy with regard to months of the year?

Statistically, now, but that doesn't mean it'll be so this year, or next, or the year after or ...

Chris Dillow writes in the IC this week on the OP paper. https://www.investorschronicle.co.uk/comment/2018/10/25/the-halloween-signal/

PPS On a more serious note, despite seasonal/cyclical fluctuations, surely the main purchasers a pension funds? Which must buy all year round...

Pension funds only hold 3% of the UK market. The biggest chunk, at 53.9%, is foreign held, with 48.1% of that (i.e. 25.9% of the total) being held in North American. The next biggest chunk, at 12.3%, is held by UK individuals.

https://www.ons.gov.uk/economy/investmentspensionsandtrusts/bulletins/ownershipofukquotedshares/2016

Yup, was reading that very article myself last night after I posted to here. Thanks for the stats. BTW, surprised by those figures to be honest...

[TheMotorcycleBoy]

To answer the question asked, IMO either do a bit of market timing but accept it's not a monthly thing but pretty random, or now is the time (as previously suggested)

Thanks. Yes I did top up our IMB a while ago, since it was cheaper then than when we originally bought it.

Thing is we only have 2.7k left to spend in this ISA year

So I'm torn on what to do, I might buy Unilever ULVR (we "foolishly" sold, when the Dutch concept was mentioned) and I'm also thinking of Gameshop Workshop GAW.

Other than that, I/we are thinking of topping one or two of our existing holdings. Diversity, in my naive opinion, looks great in a fund. But attempting to DIY seems to lead to the possibility of buying the odd dog too often.

Anyway some of our current ones I fancy topping up are:

Marshalls Plc MSLH or
Next Plc NXT or
Bodycote BOY

As usual, if anyone has any opinion on ULVR, GAW, MSLH, NXT or BOY I would welcome your opinions.

Matt

PS. EDIT: Perhaps, i.e. cost averaging, we should spend some of the money this side of December and the rest in 2019.

[gryffron]

Wall Street Crash, Yom Kippur war, and Black Monday all occurred in October. Lehmann brothers collapsed in September. I would expect those major crashes to heavily slew the averages. What does the data look like if you ignore the major crashes?

Then the question becomes: Will major crashes ALWAYS happen in Autumn? or is it a coincidence?
Not sure there is sufficient data to answer that question.

Gryff

[TheMotorcycleBoy]

I'm sure that I read about freak weather sometime happening just before the market crashing!! Seriously....

I can't remember the book, it may have been "Planet Ponzi"

I tried googling for facts so to speak, but only found this one:

Black october '87
https://www.bbc.co.uk/news/business-19994566

[77ss]

.....
So I'm torn on what to do, I might buy Unilever ULVR (we "foolishly" sold, when the Dutch concept was mentioned) and I'm also thinking of Gameshop Workshop GAW.

Other than that, I/we are thinking of topping one or two of our existing holdings. Diversity, in my naive opinion, looks great in a fund. But attempting to DIY seems to lead to the possibility of buying the odd dog too often.

Anyway some of our current ones I fancy topping up are:

Marshalls Plc MSLH or
Next Plc NXT or
Bodycote BOY

As usual, if anyone has any opinion on ULVR, GAW, MSLH, NXT or BOY I would welcome your opinions.

Matt

PS. EDIT: Perhaps, i.e. cost averaging, we should spend some of the money this side of December and the rest in 2019.

FWIW, I recently added to my ULVR holding. Had some spare cash, and I hoped, that now the restructuring shenanigans are over, management can return to minding the shop! Wishful thinking perhaps, but I have held for nearly 8 years now and it has been a very solid performer. Modest yield, but decent dividend increases and capital growth.

I occasionally look at BOY and GAW - both are interesting, but I have enough holdings right now.

NXT? Brave!

[TheMotorcycleBoy]

FWIW, I recently added to my ULVR holding. Had some spare cash, and I hoped, that now the restructuring shenanigans are over, management can return to minding the shop! Wishful thinking perhaps, but I have held for nearly 8 years now and it has been a very solid performer. Modest yield, but decent dividend increases and capital growth.

Thanks for this I may have a punt next week.

NXT? Brave!

You may well say that. You have far more investment miles on the clock than me.

I have done a lot of research on NXT (I can't help but - mother-in-law has worked there for 15+years!!). They are a retailer, yes, but have a big brand presence, furthermore they are slowly moving more and more to online......indeed there are slowly transitioning parts of the "high-street" stores into warehousing for their online enterprises. I don't really know the full details, and I'm sure that it's similar to the way a lot of others (screwfix et al.) are going.

Finally....upon reading the latest IC, Phil Oakley contributed a 4-page piece on "cash flow yield". Of all the 20 odd firms he lists (e.g. ULVR, GAW, FEVR, SPX, DGE...), NXT at 6.5% currently was tops. Whilst the key point of course was growing/maintaining the cash flow, I was very surprised that NXT had the highest. Check it out!

Matt

[TUK020]

As usual, if anyone has any opinion on ULVR, GAW, MSLH, NXT or BOY I would welcome your opinions.

Matt

a couple of stocks that I| have topped up recently on the unscientific basis of a) share priced having dropped significantly, b) directors share purchases are VOD & BOY