Sell in May and go away must be one of the most famous phrases in the stock market. But is it correct? This is the first time I test this. There is a lot of academic empirical evidence showing this anomaly has been in existence for many decades, both in the USA and elsewhere.
I test the following on Norwegian OBX index from 1997 until today (OBX includes the 25 most liquid stocks on Oslo Stock Exchange):
- Buy the open on the first day of May, sell the open first day in October, versus
- Buy the open on the first day of October, sell the open first day in May.
Buying the open in May and selling the open in October gives this accumulated chart:
Total return is slightly negative (-0,41% annual return). There are just 5 losing months out of 17, but the average winner is “only” 11.69% versus the average loser of 24.95%. All 5 losers are bigger than 10%: 2001 (-26%),2002 (-35%), 2006 (-10%), 2008 (-30%) and 2011 (-22%).
Buying the open in October and selling the open in May gives this accumulated chart:
Annual return is 11%. Average winner is 16.13% and average loser is 11.31%. 3 losing periods: 2000/2001 (-10%), 2007/2008 (-4%) and 2008/2009 (-20%).
The “skewness” looks nice:
