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  German AM CIO View: Investing by Season News | Bit Updates
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German AM CIO View: Investing by Season News

Sunday, October 29th, 2017 | bitcoin updates

Eight years of bullfighting are behind us – the mountain ride is getting old. Should investors now make cash? On the other hand, there were in the past course rallies that lasted well over ten years. And there are also fundamental reasons that speak for staying.

The global economy is gaining momentum, and interest rates in the industrialized countries remain low due to the moderate rise in inflation. The favorable inflation environment gives central banks the opportunity to proceed slowly and cautiously when returning to normal monetary conditions.
Old-established stock exchange rules

Another reason to stay committed is the seasonality. "Sell in May and go away" is an old stock exchange rule, often supplemented by "but remember to come back in September". A look at the Dax course history shows that this rule contains a true core.

The analysis of the monthly developments shows that the German leading index has been able to deliver price gains in more than two-thirds of cases in the months of October, November and December since its launch in late 1987. Also in the first four months of the year the Dax developed in the overwhelming number of cases and thus also on average positive.

The worst months have been in the past 30 years of August and September. Marks of these months are major price drops and a negative average return. The entry into the Dax usually only paid again in late September.
Winning timing

The stock exchange rules have a certain validity not only in Germany, but also internationally. Professors Sandro C. Andrade, Vidhi Chhaochharia and Michael E. Fuerst from the University of Miami examined seasonal effects from 1998 to 2012 in 37 countries. Based on local MSCI indices, they calculated that the profit on the various stock markets averaged around ten percent over the period from May to October from November to April. 1

Ben Jacobsen, a professor at TIAS Business School, and Sven Bouman, CEO of Saemor Capital, achieved similar results for the period from May 1970 to October 1998 in the 37 countries. 2 Since October 31 is Halloween, they called this anomaly as a Halloween effect. 3
Puzzles about market anomaly

The statistical evidence should have meant that the investors exploit this market anomaly from their publication in 2002. The continuity of this anomaly shows that this has not happened. This provides for puzzle-riddles, why this time anomaly in the markets proves so permanent.

Bouman and Jacobsen suspected that the effect of time and duration is caused by the holidays. Their thesis: Before the holiday, the investors reduce their risk position by selling securities. The trading volume is low during the holiday period. After the holiday season, the investors then stop their stock quota. A connection with the holidays is recognizable. The thesis can not be proved with certainty.
Fickle October

October is a month in which the risk of a crash is quite high. The higher average volatility, which is a measure of the price fluctuation intensity, shows that this is the case so far. On the whole, however, the October gave the Dax gains in the overwhelming number of cases. Accordingly there are discussions about whether investors – as usual in the international analyzes – should buy the shares from the Dax at the end of October or already at the end of September.

The reckoning from the end of 1987 to the end of September 2017 gives a clear answer. Anyone who bought the Dax every year during this period and sold it again at the end of April was able to earn a profit of 3,222 percent. However, those who only got to the end of October only achieved a profit of 1,581 percent. The investors, who bought the Dax at the end of 1987 and held up so far, were even worse off. They generated a performance of 1.183 percent.
Reduced risk

It is also worth taking a look at the risk. The volatility in "buy and hold" since the Dax start was 22 percent. At the end of September and the exit at the end of April, volatility decreased to 17.1 percent, with an entry at the end of October and the exit at the end of April to 14.7 percent. However, investors, who only started at the end of October, gave a lot of profit. Despite the higher October risk, it was worthwhile for investors to enter at the end of September.

Two drops of vermouth remain. Who this year on the stock exchange rules, missed the high price gains, which brought the September this year. Moreover, the theory that market anomalies such as the effect of the override of the end of September to the end of April are profitable at some time and the market thereby gains in efficiency. But there are so far no indications.
Dax with a strong closing quarter

Since its launch in 1988, the Dax has achieved the highest average yields in the fourth quarter. In August and September there was generally a dulling.

Source: Thomson Reuters Datastram; Stand: 02.10.2017

* Viewing period: 01/1988 to 09/2017
Whimsy October

In October, the Dax went up and down in the past. More peace prevailed in spring and summer.

Source: Thomson Reuters Datastram; Stand: 02.10.2017

* Viewing period: 01/1988 to 09/2017

1 Sandro C. Andrade, Vidhi Chhaochharia, Michael E. Fuerst: "Sell in May and Go Away" Just Will not Go Away. In Financial Analysts Journal, Volume 69, Number 4, 2013
2
Sven Bouman, Ben Jacobsen: The Halloween Indicator, "Sell in May and Go Away": Another Puzzle. American Economic Review 92, 2002
3
In the research work of Andrade, Chhaochharia and Fuerst as well as Bouman and Jacobsen, the 30th of April was defined as the date of departure and the 31st of October, ie Halloween, as the starting date.

Forward-looking statements and forecasts include material elements of subjective assessments and analyzes, and their alterations and / or the inclusion of various additional factors that could have a material impact on the results and could prove to be incorrect. Past performance is not a reliable indicator of future performance. Deutsche Asset Management Investment GmbH; Stand: Oct. 24, 2017
With a total of € 739 billion of assets under management (as of March 31, 2016), Deutsche Asset Management is one of the world's leading asset managers. Deutsche Asset Management offers private investors and institutions a broad range of traditional and alternative investment solutions across all investment classes.

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Our product and solution offer provides flexible access to a wide range of investment opportunities across all asset classes – from fund solutions to tailor-made customer portfolios. These include actively and passively managed investment funds, institutional mandates and structured financial products such as ETFs and certificates. Our consultants and investment experts are committed to developing investment management solutions tailored to the needs of each client as well as their individual requirements regarding risk, return and liquidity.
Chief Investment Office
Our forecasts for the global economy and the financial markets are prepared at the Chief Investment Office of Deutsche Asset Management. Our broad market transparency is brought together under the direction of CIO Stefan Kreuzkamp. In this way, we use our investment expertise efficiently and to the benefit of our customers. The coordinated analysis of developments in different regions and market segments enables us to develop a comprehensive and holistic investment approach and to take all relevant parameters into account in our investment decisions. All investment activities are based on our in-house in-house research, our disciplined investment approaches and our consistent risk management.

Stand: 20.04.2016

The above text reflects the opinion of the respective columnist. The finanzen.net GmbH assumes no responsibility for its correctness and excludes all claims for reimbursement.
Image sources: CIO View, CIO View

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