It’s Time to Buy Stocks According to Yale Hirsch

By on October 31, 2010

Mebane Faber at World Beta comments on the popular “Sell in May and Go Away” strategy. Surprisingly, it seems to have universal appeal throughout the world:

One popular system many people discuss is the “Sell in May and Go Away” (also known as the Halloween Indicator) strategy. The system simply invests in the stock market from November – April, then moves to cash from May – October. This strategy popularized by Yale Hirsh (who writes the informative and entertaining Stock Trader’s Almanac 2011), has its origins in the U.K. market as far back as 1935 (see must read paper “Are Monthly Seasonals Real?“).

The paper finds very strong evidence of abnormal performance in the UK since the 1600s, and Bouman and Jacobson (2002) find that the strategy works in 36 of the 37 countries they tested.

Faber points out in several revealing graphs the uneven performance of this widely touted investing maxim. From 1900 through 1950 there was no benefit from using this strategy in the U. S. However, from 1950 through 2010 the improvement in returns is stunning.

Source: World Beta

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