'Sell in May and Go Away' Just Won't Go Away

Abstract

We perform an out-of-sample test of the Sell in May effect studied by Bouman and Jacobsen (American Economic Review, 2002). Reducing equity exposure starting in May and levering it up starting in November persists as a profitable market timing strategy. On average, stock returns are about 10 percentage points higher in November-April half-year periods than in May-October half-year periods. We also find the Sell in May effect is pervasive in financial markets.

Keywords: Sell in May, calendar anomalies, market timing, market efficiency, time varying risk-aversion

JEL Classification: G14, G11