Friday, November 9, 2012

A Warm November?

Now that November is here, are stocks due to heat up for the next couple of months? There's a longstanding adage that investors should "Sell in May, then go away"; the time they're supposed to return to the market is in November. And there's a growing body of research suggesting this may be exactly the right move.

Two researchers in New Zealand recently took a staggeringly comprehensive look at the phenomenon, examining every bit of historical data they could from 108 different markets. They had a whopping 300 years’ worth of information regarding the market in the United Kingdom alone. The bottom line: Returns from November through April over all that time were 4.52 percent higher than returns from May through October. 

And if anything, the effect is getting stronger. In 
the past 50 years, the average advantage for May through October has increased to 6.25 percent. Over the last five 10-year sub-periods that the researchers looked at, the November Effect ranged from 5.08 percent to 8.91 percent. In other words, it’s lately been at least 5 percent, and is regularly much more than that. This is definitely something to keep in mind.

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