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Feb 7

Sell in May and Go Away: Evidence from China

Posted by abiao at 11:34 | Default | Comments(0) | Reads(1674)

We examine the “Sell in May and Go away” puzzle first identified by Bouman and Jacobsen (2002) using the Chinese stock market data from 1997 to 2013. We find strong existence of the Sell in May effect, robust to different regression models, industries, and after controlling for January or February effect. We then construct a trading strategy based on this puzzle that outperforms the buy-and-hold strategy and could resist the market downside risk during large recession periods.

Below is a cumulative return graph for the Sell in May strategy, compared with the Buy-and-Hold strategy, it indeed prevents investors from dramatic losses.
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