There is a very famous investment philosophy to Sell in May and return in October.
Lets see how that strategy works for our Indian Markets.
The conditions are to Sell on first day in May and Buy on first day on October with commissions of 5 bps.
We are testing this from year 1980 and 2010 so that it covers most of the history available.
How are the results? Well, its not profitable. The initial equity of $10K got reduced to $9.8K while buy and hold was massively up by ~2 times.
Here's the snap shot of the performance.
There were only 10 profitable years among the 31 years of testing with the year 2010 contributed massively $4780 to the results.
The profits are completely skewed by a single year.
This clearly shows that the strategy is not profitable in itself but there was one profitable trend. That was the higher probability of a dip in early May which lasts for 2-3 weeks on an average.
Here's the equity graph.
Lets see how that strategy works for our Indian Markets.
The conditions are to Sell on first day in May and Buy on first day on October with commissions of 5 bps.
We are testing this from year 1980 and 2010 so that it covers most of the history available.
How are the results? Well, its not profitable. The initial equity of $10K got reduced to $9.8K while buy and hold was massively up by ~2 times.
Here's the snap shot of the performance.
There were only 10 profitable years among the 31 years of testing with the year 2010 contributed massively $4780 to the results.
The profits are completely skewed by a single year.
This clearly shows that the strategy is not profitable in itself but there was one profitable trend. That was the higher probability of a dip in early May which lasts for 2-3 weeks on an average.
Here's the equity graph.
Maan Gayee Guru. Wish could have taken the MAY month leverage SELL call seriously.
ReplyDeleteWHICH SOFTWR DO U USE FOR CHARTING AND BACKTESTING ?
ReplyDeleteHey Gulshan,
ReplyDeleteI use Amibroker and Metastock for analysis.
Can u elaborate the benefits and drawbacks of both with the cost associated with the two.
ReplyDeleteGulshan,
ReplyDeleteAmibroker is cheap and more powerful than Metastock. The only advantage Metastock has is being simple and one can learn faster. It is sufficient if one needs to do simple analysis. Amibroker on the other hand is very feature full and one can easily say it to be advanced version of Metastock.