Stephen Eckett - The UK Stock Market Almanac 2014: Seasonality Analysis and Studies of Market Anomalies to Give You an Edge in the Year Ahead

Studies appearing in the Almanac for the first time include:

• FTSE 100/250 Monthly Switching Strategy on the back of research into the comparative monthly performance of the FTSE 100 and FTSE 250, a strategy of switching between the two markets is found that greatly outperforms either index individually.
• Day Of The Week Strategy a strategy exploiting the day of the week anomaly is presented; it significantly outperforms the FTSE 100.
• Monthly Share Momentum Strategy in the previous edition of the Almanac a monthly rebalanced momentum portfolio of FTSE 100 stocks beat the market by an average of 1.1 percentage points per month. This strategy is now applied to FTSE 350 stocks and the outperformance is found to increase to 2.9 percentage points per month.
• Monthly Share Bounceback Strategy this is the opposite of the above momentum strategy; in this case the 10 worst performing stocks were selected for the monthly rebalancing. This strategy not only beat the FTSE 350 but also beat the momentum strategy.
• Monthly seasonality of sectors analysis of the monthly performance of FTSE 350 sectors reveals the strongest and weakest sectors for each month.
• Strong/weak shares by month analysis of FTSE 350 shares reveals those that have performed consistently strongly or weakly for each month for the past ten years. Some shares have risen (or fallen) in a specific month for every year since 2003.
• Average market behaviour by month by taking the average performance of the market on each day of a month it is possible to create a chart of the average performance of the market for that month. This has been done for all 12 months and an aggregate average chart for the whole year produced.
• Good trending shares a system is presented for ranking high-return, low-volatility shares.
• Daily volatility of the stock market is October really the most volatile month?
• Exxon v Shell pairs trading analysis of the monthly comparative performance of Exxon and Shell.
• Correlation between UK and international markets new analysis of the correlation of the UK with six overseas stock markets.
• FTSE 100 v CAC40 analysis of the comparative monthly performance of the UK and French markets.
• Monthly seasonality of the Brazil market January and October are the strongest months for the Brazilian stock market.
• FIFA World Cup how does hosting and winning the World Cup affect stock markets?
• The Scottish Portfolio what would an independent Scotland look like to investors? (Shh, dont mention the banks.)
• Monthly seasonality of gold February, September and November have historically been strong months for gold. And a chart of the FTSE All-Share priced in gold is shown.
• Monthly seasonality of GBPUSD strong months for sterling against the dollar have been April and October.

Weve added some new features to the month summary pages in the diary:

1. Alongside the chart of the performance of the market in the month theres now an average performance chart for the month. This is calculated by taking the average performance of the market on each day in the month since 1985 and using these to create a cumulative performance chart for the month to give an idea of the behaviour of the market over the 22 or so trading days of each month.
2. In the summary table, the first row gives the three main statistics that describe the historic performance of the market in that month: the average return, the percentage of months where the return is positive and the ranking among the 12 months.
3. In the summary table, the second row displays the sectors that have been historically strong (and weak) that month.
4. In the summary table, the third row displays the shares that have been historically strong (and weak) that month.

As in the previous edition, there is a table at the start of each month giving the Sinclair numbers for the FTSE 100, FTSE 250, S&P 500 and Nikkei 225.