January barometer is most discussed for predicting the year end returns for any index.
Lets analyze the January effect on Indian markets. Although the Sensex does not century old data so that we can draw some conclusion with large set of numbers so lets see whatever we can find out with the 30 years of data.
The preliminarily data shows correlation of 0.23 with R square at 0.054 which is quite weak for making any direct statistical analysis. This is evident from the following chart also. There are large number of outliers from the linear trendline.
Going further lets apply some filters and see if we can good data coorealtions. The first filter can be of bands of price change and then finding the probability. Following is the analysis:
The probability of having a bullish year for a negative January is at 62% which is quite high. But wait.
The last 2 rows shows show the returns with price filters. And both of them have very less probability of bullish year.
The Jan 2011 had -11% returns so the last row shows bullish year has chances of 25% with average change of last occurrences at -11% which is quite bearish figure.
Lets analyze the January effect on Indian markets. Although the Sensex does not century old data so that we can draw some conclusion with large set of numbers so lets see whatever we can find out with the 30 years of data.
The preliminarily data shows correlation of 0.23 with R square at 0.054 which is quite weak for making any direct statistical analysis. This is evident from the following chart also. There are large number of outliers from the linear trendline.
Going further lets apply some filters and see if we can good data coorealtions. The first filter can be of bands of price change and then finding the probability. Following is the analysis:
The last 2 rows shows show the returns with price filters. And both of them have very less probability of bullish year.
The Jan 2011 had -11% returns so the last row shows bullish year has chances of 25% with average change of last occurrences at -11% which is quite bearish figure.
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