Own seven of the world's stock markets from November to April, then sit in cash until October. Over fifty-five years this grew $1 into $19.70 while the worst fall was a third of the account — against $36.80 and a loss of nearly two-thirds for simply staying invested.
Passed all six checks. Indicative performance of 5.4% a year is 1.1 points below the 6.5% returned by holding the same universe continuously, return for risk taken sits at 0.58 against the benchmark's 0.47, and the worst fall of 36.1% is 25.8 points below the benchmark's 61.9%. Exposure was held in 330 of 656 months.
Equity returns concentrate in November–April. A basket that sits flat over May–October earns a better risk-adjusted return than one continuously invested.
Two researchers, Bouman and Jacobsen, found this pattern in 36 of 37 countries in 2002. Most calendar patterns vanish once people know about them. This one has not: a later study traced it back three centuries in British data.
That history is why it was allowed in here. It was not found by rummaging through this dataset until something turned up. It was already on the record, and this is a check of it.
The rule is deliberately blunt. If the effect is real, it should show up in the simplest version of the idea, not only in a carefully tuned one.
It passes every test. Measured against the same basket held all year, it earns a better return for the risk taken, and its worst fall is a third of the account rather than two-thirds. The profit is spread across the years rather than arriving in a lucky handful of months.
There is no mystery in how it works. The strategy is invested about half the time and sits out the worse half. Less exposure means smaller losses, and a better return per unit of risk follows from that alone.
A dollar becomes $19.70 here, against $36.80 for simply staying invested. The better risk-adjusted return never turns into more money. To convert it you would have to borrow in order to take the same risk as the plain approach, and borrowing costs money that this test does not charge.
The last decade also reverses the comparison. Over the whole history the strategy leads; over 2015 to 2026 alone, staying invested wins. A strategy whose job is to avoid trouble does badly in a decade with little trouble in it.
One caveat runs the other way. These indices exclude dividends, and the strategy's idle cash earns nothing here. In reality the cash would earn interest, and over this period interest was worth more than the dividends given up. The test is harder on the strategy than reality would be.
A higher Sharpe that cannot be levered is a smoother path to a smaller number.
| Measure | Value |
|---|---|
| Annualised return | 5.4% |
| Annualised volatility | 9.3% |
| Return for risk taken | 0.58 |
| 95% range | 0.32 to 0.85 |
| t-statistic | 4.32 |
| Maximum drawdown | 36.1% |
| Hit rate | 63.6% |
| Annual turnover | 2.07× |
| Return skew | (0.09) |
| Return kurtosis | 10.62 |
| Diagnostic | Value | Reads as | Bad | Okay | Yay | Hmm |
|---|---|---|---|---|---|---|
| Design half (pre-2015) | 0.64 | return for risk | ≤ 0 | 0 – 0.40 | ≥ 0.40 | |
| Holdout half (2015+) | 0.36 | return for risk | ≤ 0 | 0 – 0.40 | ≥ 0.40 | |
| Top-5-month share of profit | 18.7% | how much rode on a few months — lower is better | ≥ 40% | 25 – 40% | < 25% | |
| Top-2-year share of profit | 17.7% | concentration | — | — | — | |
| Distinct trading episodes | 55 | how many independent runs this really is | < 50 | 50 – 100 | ≥ 100 | |
| Chance the edge is real | 100.0% | non-normality corrected | — | — | — | |
| Chance it beats the whole search | 25.6% | chance of beating the whole search by luck | — | — | — |
| Check | What it asks | Result |
|---|---|---|
| 1 | Reward large enough for the risk | pass |
| 2 | Confidence range clear of zero | pass |
| 3 | Profit not concentrated in a few months | pass |
| 4 | Worked in both halves of the history | pass |
| 5 | Beat buying and holding | pass |
| 6 | Stood out from the whole search | pass |
| Year | Net return |
|---|---|
| 1971 | 7.9% |
| 1972 | 10.7% |
| 1973 | (20.6%) |
| 1974 | (15.5%) |
| 1975 | 25.1% |
| 1976 | 16.0% |
| 1977 | (6.1%) |
| 1978 | 4.6% |
| 1979 | 11.2% |
| 1980 | 4.5% |
| 1981 | (2.0%) |
| 1982 | (0.4%) |
| 1983 | 16.2% |
| 1984 | (2.6%) |
| 1985 | 17.7% |
| 1986 | 9.8% |
| 1987 | 15.3% |
| 1988 | 4.9% |
| 1989 | 14.3% |
| 1990 | 1.4% |
| 1991 | 18.6% |
| 1992 | 3.2% |
| 1993 | 0.4% |
| 1994 | (8.6%) |
| 1995 | 13.1% |
| 1996 | 12.8% |
| 1997 | 7.3% |
| 1998 | 20.1% |
| 1999 | 27.1% |
| 2000 | (4.9%) |
| 2001 | 6.8% |
| 2002 | (1.1%) |
| 2003 | 5.5% |
| 2004 | 7.9% |
| 2005 | 0.5% |
| 2006 | 15.2% |
| 2007 | 4.4% |
| 2008 | (12.4%) |
| 2009 | 10.1% |
| 2010 | 3.4% |
| 2011 | (1.1%) |
| 2012 | 10.5% |
| 2013 | 5.4% |
| 2014 | 2.2% |
| 2015 | 4.1% |
| 2016 | 2.7% |
| 2017 | 10.0% |
| 2018 | 0.0% |
| 2019 | 11.9% |
| 2020 | (3.8%) |
| 2021 | 2.6% |
| 2022 | (3.5%) |
| 2023 | 10.8% |
| 2024 | 2.7% |
| 2025 | (0.7%) |
| 2026 | 0.5% |
| Measure | Value |
|---|---|
| Best years | 1999:+27%, 1975:+25%, 1998:+20% |
| Worst year | 1973:-21% |
| Rev | Stage | Status | Change |
|---|---|---|---|
| 01 | Draft | — | Direction and criteria fixed before the experiment ran |
| 02 | Tested | Validated | Cleared every criterion |