Seasonality
Seasonality Strategy
Seasonality is a generic term for an anomaly in which a pattern is seen in the market movement according to the season. In the stock market, the performance from November to April is the performance from May to October is known to exceed (this is also called the Halloween effect). If you invest in the index in November-April and deposit in May-October, let's see what the results are.
Period: 1996.01~2019.12
Asset class: KOSPI index
Strategy: November-April index, May-October deposits
November-April US Stocks & May-October US Long-Term Exchange vs. US Stock Redeemed Performance Comparison
There are numerous papers and research papers on this phenomenon.
The exact reason for this is not known for certain, but we have made some assumptions.
1. People's emotions change with the seasons. From November to April, the weather is cool and people are in a good mood as the new year begins, so they invest more. From May to October, the weather is hot and annoying, so they don't invest.
2. From May to October, fund managers on Wall Street go on vacation. So liquidity and volatility decrease and the market is quiet?
3. You intentionally sell your losses in December to offset your profits to minimize taxes. And repurchase in January (tax saving)
So, how about applying Bitcoin?
Bitcoin Seasonality
Strategy: May-October Bitcoin investment, November-April cash reserve
Buy: Buy Bitcoin on May 1st
Sell: Sell Bitcoin on October 31st
The rate of return is less than that of deferred investment, but you can see that volatility and mdd have been greatly reduced.
This time, it is the result of increasing the investment from May to October to April to October.
Strategy: April-October Bitcoin investment, November-March cash reserve
Buy: Buy Bitcoin on April 1st
Sell: Sell Bitcoin on October 31st
As a result, the performance seems to be better. But there are some problems here.
1. The seasonality effect of traditional asset classes has been verified over hundreds of years. Bitcoin was born in 2008 and was first listed on an exchange in 2010. Bitcoin has 12 years of history and there is too little data.
2. It is not certain whether the seasonality will continue to work in the future. Just because these strategies have worked recently doesn't mean they will work in the future. The prerequisite is that the correlation with the stock market is low, but later the correlation may be high.
3. 4-10 investments yielded better returns than 5-10, but this may be over-optimization. If you change, edit, and add filters to make things better, you fall into the trap of overfitting. In fact, if you invest like this, you may make a mistake with the pot properly.
Conclusion :
Bitcoin also has a seasonality effect.
But no one knows if it will work in the future.