According to our weathered copy of the Stock Trader's Almanac, May is one of the worst months of the year for the stock market. No surprise then that the old adage “Sell in May and go away, come back on St Leger's Day" still persists in the headlines. More than half the years since 1970 have apparently seen negative returns. And the average performance has been -0.6%. Should you be concerned? Not according to US investor Ken Fisher. He recently wrote recently in Money Observer that selling up in May is 'very wrong and financially bad advice'.
Seasonal anomalies are a huge source of intrigue for academics. Back in 2002Ben Jacobsen and Sven Bouman came up with what's regarded by their peers as the seminal work on the Sell in May strategy. They found that in most countries 'the average returns in the period May-October are not significantly different from zero and are often even negative'.
Alas, a more recent investigation of the strategy tallies with Fisher's belief that it's bunkum. Last year researchers Hubert Dichtl and Wolfgang Drobetz revisited the data and found that this seasonal effect had weakened or even diminished recently. They said it no longer constituted a “free lunch". It turns out that the concept of efficient capital markets has slammed the door on this one.
At Stockopedia this week we had a look at Ten FTSE 350 stocks for dividend growth investors. Alex Naamani covered the The Maiden Dividend Anomaly in his StockRank Movers column, while our small-cap expert Paul Scott was kept busy with his daily reports, which you can read here.
Elsewhere this week, we've been reading:
- The Investor's Field Guide - The O'Doul's of Value Investing
- John Authers, FT - Why multi-factor funds are smarter beta (£)
- A Wealth of Common Sense - How Often Are Markets “Normal?"
- Justin Fox, Bloomberg View - Why Did the CEO Buy That Company?
- Above the Market - Make fewer decisions
- John Kingham, UK Value Investor - The FTSE 100 at 5,000 or 10,000: Which is more likely in the next 5 years?
- Lee Wild, Interactive Investor - Which asset bubble will burst first?
- Monevator - UK historical asset class returns
- John Tamny, Forbes - U.K. Elections Expose Crash-Obsessed Stock Market Pundits As Worthless