Sell in May. The January Effect. The Santa Claus Rally. Three lines almost every trader repeats by December, and almost none of them have opened the papers behind any of the three.
One economist tested 37 countries and found winter months beating summer months in 36 of them. Not a forum theory. The American Economic Review, 2002, and a follow-up study almost twenty years later that found the pattern had not faded at all.
Meanwhile a second pattern, discovered by the same kind of research back in 1976, has spent the decades since falling apart on its own. Same calendar logic. Completely different outcome. The report explains exactly why one held and the other didn't.
Then it goes a step further than any of the source papers do. It builds two original simulations from scratch, twenty thousand runs each, to answer the one question none of the academic literature tests: does trading this, mechanically, twice a year, for decades, beat owning the position and never touching it again?
The switching strategy won 28 percent of the time. Over a simulated 30 years, its median result finished $43,300 behind doing nothing at all. A statistically documented edge, and a losing strategy anyway, once the cost of acting on it got added back in. The full math, and every source behind it, is below.
A Trading Habits Report
The Seasonality Trading Report
What the Halloween Indicator, the January Effect, and the Santa Claus Rally are actually built on, what published research across 37 markets found, and an original simulation of what chasing the pattern costs after fees.
- Length 20 pages, with 7 original charts and two 20,000-run simulations
- Author TradingHabits.com
- Format PDF, delivered as an instant download right after checkout
- Covers the Halloween Indicator, the January Effect, the Santa Claus Rally, the published academic research behind each, and two original noise-versus-cost simulations
No stock, fund, or ticker is named anywhere in this report. Every pattern is tested at the index level, using published research and original simulations only.
What's Inside
20 Things This Report Actually Says
- 01Why Sell in May, the January Effect, and the Santa Claus Rally are three different claims, not one idea repeated three ways.Page 4
- 02Bouman and Jacobsen's 2002 finding: winter returns beat summer returns in 36 of 37 countries tested.Page 5
- 03Why the authors called their own discovery a puzzle, and what they ruled out before they said so.Page 5
- 04The exact S&P 500 numbers: 7.1 percent average winter returns against 1.7 percent for summer, since 1950.Page 6
- 05A 2021 follow-up study that checked the pattern almost twenty years later, using an even longer data set.Page 7
- 06The original 1976 January Effect study: a 3.5 percent average versus 0.5 percent for every other month.Page 8
- 07Why the January Effect faded, in a 34-market study most retail traders have never seen.Page 9
- 08Yale Hirsch's own seven-day definition of the Santa Claus Rally, and the line he wrote if it fails to show up.Page 10
- 09The actual track record since 1950: the share of years the window finishes positive, and by how much.Page 10
- 10The 2009 study that tested the broader holiday effect and came back with a different answer entirely.Page 11
- 11Three competing explanations for why any of this holds up at all, and why none has settled the argument.Page 12
- 12An original 20,000-trial simulation isolating how much of a single year's seasonal split is pure noise.Page 13
- 13Why that number does not undercut the published research, and what question it actually answers.Page 14
- 14A fully hypothetical, hand-worked switching strategy walkthrough, no ticker, no actual account attached.Page 15
- 15A second original simulation: 20,000 runs of a 30-year switching strategy against buy-and-hold, net of costs.Page 16
- 16The result: a documented edge that still lost to doing nothing, most of the time, once costs compounded.Page 16
- 17The cost that never shows up on a brokerage statement, and why it matters as much as the fee math.Page 17
- 18Eight questions to run before trading any calendar pattern, not only the three covered here.Page 18
- 19Seven sources, from the original 1976 and 2002 papers to a 2021 follow-up, listed with exactly what each one backs up.Page 19
- 20A seven-term glossary defining every concept in the report the first time it appears.Page 3
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Behind The Report
36 Of 37 Countries, And One Question The Papers Never Asked
Thirty-Six Out Of Thirty-Seven
Bouman and Jacobsen tested stock index returns across 37 countries, most with data running from 1970 through 1998, and found winter months outperforming summer months in 36 of them. A UK data set stretching back to 1694 held up the same way as a follow-up check.
Almost twenty years after publication, a 2021 follow-up study checked again, using an even longer combined sample. The pattern was still there.
What No Paper Had Priced Out Yet
Every study behind this report measured whether the pattern exists. None of them measured what happens after a trader tries to act on it twice a year, for decades, with actual spreads, commissions, and taxes attached.
So this report built its own simulation from scratch: 20,000 runs, 30 simulated years each, stated cost assumptions. No stock, fund, or ticker is named anywhere in this report or on this page.
36 Of 37 Markets, In One Chart
A simplified rendering of the chart discussed on page 5 of the report. Background only. The report itself covers the full sourcing and the 2021 follow-up study behind this figure.
Try It: A Switching-Strategy Cost Calculator
A simplified version of the cost math behind the report's own Section 11 simulation, using the report's stated 7.1 percent winter and 1.7 percent summer average return assumptions. Not a forecast, not tied to any actual broker's fee schedule, and not a recommendation. The full 20,000-run simulation, with its complete assumptions, is in the report.
Background only. Nothing on this page or in this report is a recommendation to buy, sell, or hold any security, or to trade around any calendar pattern.
Common Questions
Is the Halloween Indicator actually documented, or only trading folklore?
It has a documented published research base behind it, more than most calendar patterns traders repeat. Bouman and Jacobsen's 2002 paper in the American Economic Review found winter returns beating summer returns in 36 of 37 countries tested, and a 2021 follow-up study found the pattern still held up almost twenty years later. That does not settle why it happens, or whether trading it after costs makes sense, both covered directly in the report.
Does the January Effect still work today?
Largely, no. The original 1976 study found January averaging 3.5 percent against 0.5 percent for other months, concentrated in small, recently underperforming stocks. A 2011 study covering 34 international markets through 2010 did not find a broad January effect, finding December and April standing out instead. The report walks through the tax-loss-selling mechanism that likely explained the original pattern, and why it faded, on page 9.
Does this report tell me how to trade any of these patterns?
No, and it isn't trying to. It lays out the published research, an original noise-baseline simulation, a fully hypothetical switching-strategy walkthrough, and a second simulation pricing out what that strategy costs against holding on and doing nothing else, then hands you an eight-question checklist on page 18. No stock, fund, or ticker is named anywhere in it.
What did the switching-strategy simulation actually find?
Twenty thousand simulated 30-year runs, comparing a mechanical Halloween Indicator switching strategy against a simple buy-and-hold position with the identical underlying average return. The switching strategy's median result landed near $49,400 from a $10,000 start. Buy-and-hold's median result landed near $92,700. Switching only won in about 28 percent of the simulated runs, once spreads, commissions, and a stated illustrative tax drag were applied twice a year. The full method and every assumption are on page 16.
Sources & Further Reading
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Bouman, S. & Jacobsen, B. (2002). “The Halloween Indicator, ‘Sell in May and Go Away’: Another Puzzle.” American Economic Review, 92(5), 1618-1635.
Tested 37 countries and found winter months outperforming summer months in 36 of them, the exact chart above.