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Calendar Anomalies in Stock Index Futures

Last Updated on 10 February, 2024 by Rejaul Karim

In the dynamic realm of stock index futures, Oscar Carchano and Ángel Pardo Tornero unravel the intricacies of calendar anomalies in their work, “Calendar Anomalies in Stock Index Futures.”

Amidst a landscape teeming with studies on market irregularities, the duo offers a meticulous examination of 188 potential cyclical anomalies across S&P 500, DAX, and Nikkei futures contracts from 1991 to 2008. Contrary to the fading seasonal effects in spot markets, the futures arena proves resilient to calendar anomalies.

Employing percentile-t-bootstrap and Monte Carlo methods, the study identifies the turn-of-the-month effect in S&P 500 futures as the singular anomaly standing the test of statistical scrutiny, exhibiting both economic significance and enduring persistence over time.

Abstract Of Paper

There exist a large and increasing number of papers that describe different calendar anomalies in stock markets. Although empirical evidence suggests that seasonal effects disappeared after the early 1990s, new studies and approaches assert the continuation of some anomalies in stock indexes. In this paper, we present a comprehensive study of 188 possible cyclical anomalies in S&P 500, DAX and Nikkei stock index futures contracts from 1991 to 2008. Frictions in futures markets, unlike spot markets frictions, make it feasible to produce economically significant profits from trading rules based on calendar effects. By applying a percentile-t-bootstrap and Monte Carlo methods, our analysis reveals that the turn-of-the-month effect in S&P 500 futures contracts is the only calendar effect that is statistically and economically significant and persistent over time.

Original paper – Download PDF

Here you can download the PDF and original paper of Calendar Anomalies in Stock Index Futures.

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Author

Oscar Carchano
University of Valencia – Department of Financial Economics

Ángel Pardo Tornero
University of Valencia – Department of Financial Economics

Conclusion

In conclusion, the examination of calendar anomalies in stock index futures provides a nuanced perspective. Despite assertions that seasonal effects diminished post-1990, our comprehensive study covering S&P 500, DAX, and Nikkei futures from 1991 to 2008 challenges this assumption.

Among the myriad of 188 cyclical anomalies, the turn-of-the-month effect in S&P 500 futures stands out—both statistically and economically significant, demonstrating persistence over time.

Notably, the unique characteristics of futures markets facilitate substantial profits from trading rules based on calendar effects. Utilizing percentile-t-bootstrap and Monte Carlo methods, our results underscore the enduring impact of the turn-of-the-month anomaly, presenting valuable insights and opportunities for navigating the complexities of stock index futures.

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FAQ

Q1: What distinguishes the study by Carchano and Tornero in the realm of stock index futures, and what specific focus does it have within the broader context of calendar anomalies?
A1: The study by Oscar Carchano and Ángel Pardo Tornero distinguishes itself by offering a meticulous examination of calendar anomalies specifically in stock index futures. The focus is on exploring 188 potential cyclical anomalies in S&P 500, DAX, and Nikkei futures contracts from 1991 to 2008.

Q2: How does the study challenge prevailing assumptions about the disappearance of seasonal effects in financial markets, and what key anomaly stands out in the analysis of stock index futures?
A2: Contrary to assertions that seasonal effects diminished after the early 1990s, the study challenges this assumption, particularly in the context of stock index futures. Among the 188 cyclical anomalies examined, the turn-of-the-month effect in S&P 500 futures emerges as the singular anomaly that is statistically and economically significant, demonstrating enduring persistence over time.

Q3: What notable insight does the study provide regarding trading rules based on calendar effects in stock index futures, and how do the findings contribute to our understanding of navigating these markets?
A3: The study highlights that, unlike spot markets, frictions in futures markets make it feasible to produce economically significant profits from trading rules based on calendar effects. Specifically, the turn-of-the-month effect in S&P 500 futures is identified as a key anomaly with enduring impact. The findings offer valuable insights for market participants, indicating opportunities for substantial profits and providing a nuanced understanding of navigating the complexities of stock index futures.

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