“Sell in May and Go Away”: Definition, Statistics, and Analysis
“Sell in May and go away” is a well-known saying in finance based on stocks’ supposedly underperforming during the six months from May 1 to October 31. The Stock Trader’s Almanac popularized the idea of the historical pattern, which found that investing in stocks as represented by the Dow Jones Industrial Average from November to April (we’ll discuss this as the “winter” period) and switching to fixed-income investments the other six months (the “summer”) would have “produced reliable returns with reduced risk since 1950.”
What it didn’t note is that if one used the S&P 500 index, which dates to 1927, you would have found the opposite: the summers almost always outperformed the winters. Our analysis shows returns were 11.23% and…
