Last Updated on June 19, 2022 by Quantified Trading
Can we find the same Santa Claus Rally in NIFTY as we do in the US?
We are approaching perhaps the strongest two/three weeks of the year: the Santa Claus Rally or the end of the year effect. We have previously covered this holiday effect in a separate article about the US Santa Claus Rally. Today we backtest to see if we can find a Santa Claus Rally in NIFTY.
We backtest the Santa Claus Rally in NIFTY
We did the following:
We downloaded the daily bars of the NIFTY 50 benchmark from Yahoo!finance. The index represents the weighted average of the 50 largest Indian companies. The index has, of course, derivatives contracts – both options and futures. The futures contract is one of the world’s most liquid.
The backtest was done like this:
- We go long at the close of the second Friday in December.
- We exit at the close of the first trading day of the new year.
We only had data back to December 2007 and thus the number of observations is a low 14.
If we invested 100 000 the first year and compounded by reinvesting 100% of the equity the following years, we get this equity curve:
It seems like the Santa Claus Rally in NIFTY is no myth.