Daily Speculations The Web Site of Victor Niederhoffer & Laurel Kenner Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter;  a forum for us to use our meager abilities to make the world of specinvestments a better place.

Home

Write to us at: (address is not clickable)

Review:
"The Calendar Structure of Risk and Expected Returns on Stocks and Bonds"(Journal of Financial Economics, October 2003)

The paper's main conclusions are:

• Quarters surrounding the end of year, i.e., the fourth and first quarters, tend to be bullish, particularly after a decline in the preceding six-month period.
• The slope of the yield curve is an incremental positive predictor; if long-term rates ae higher than short-term rates, that is bullish for stocks.

Regrettably, Ogden's study suffers from multiple comparison on top of multiple comparison and is not worth the paper written on except as an example of how to data mine, and as a possible lead to a monthly study of the yield curve as a predictor. Naturally the regression formula presented in the paper is worse than random in practice when used past the original article of 1998. -- Victor Niederhoffer

Go to more scholarly reviews