spx Monthly Returns, S&P 500, including Standard Deviations 1998

Monthly Returns, S&P 500, including Standard Deviations

January 8, 1998

Tonight I computed the next 20 day % return from the first trading day of the month by month. This is roughly equivalent to the month's return. More importantly, I calculated the %iles based on standard deviations (+.675 SD = 75th, +1.28 = 90th, and +1.65 = 95th. Note that only 1982-1995 are included and the 1987 data skew the October and November figures. Nevertheless, the results are intriguing:

Next 20 days % change from first trading day of month:

%ile:

Month:

Average: STD: 5 10 25 75 90 95

1 2.67% 5.69% -6.72% -4.62% -1.18% 6.51% 9.95% 12.06%

2 2.05% 3.38% -3.53% -2.28% -0.23% 4.34% 6.38% 7.63%

3 0.50% 2.57% -3.75% -2.79% -1.24% 2.24% 3.80% 4.75%

4 1.96% 2.42% -2.03% -1.13% 0.33% 3.60% 5.06% 5.95%

5 1.78% 3.50% -4.00% -2.70% -0.59% 4.14% 6.26% 7.55%

6 0.43% 2.45% -3.60% -2.70% -1.22% 2.08% 3.56% 4.47%

7 0.80% 3.46% -4.90% -3.62% -1.53% 3.14% 5.23% 6.51%

8 0.86% 4.62% -6.76% -5.05% -2.26% 3.97% 6.77% 8.47%

9 0.12% 3.68% -5.96% -4.59% -2.37% 2.60% 4.83% 6.19%

10 -0.96% 7.62% -13.52 -10.71% -6.10% 4.18% 8.79% 11.61%

11 -0.21% 4.01% -6.84% -5.35% -2.92% 2.50% 4.93% 6.41%

12 2.55% 2.71% -1.92% -0.92% 0.72% 4.38% 6.02% 7.02%

11-4: 1.59% 3.80% -4.68% -3.28% -0.98% 4.15% 6.45% 7.86%

5-10: 0.50% 4.59% -7.08% -5.38% -2.60% 3.60% 6.38% 8.08%

All: 1.04% 4.25% -5.98% -4.40% -1.83% 3.91% 6.48% 8.06%

What this basically means is that the November-April period is more profitable on average than May-Oct (no surprise) but has a tighter standard deviation. This could be used for an option spread strategy, for example buying the 25th %ile and selling the 75th%ile, e.g. buying the -.98% option in 11-4 and selling the 4.15% option or buying the -2.60% option in 5-10 and selling the 3.60% option.