Zacks Investment Research: Equity Market Anomalies for October 28, 2011

For Immediate Release

Chicago, IL – October 28, 2011 – Zacks Investment Research presents their newest list of stocks and ETFs featured in their weekly Equity Market Anomalies article, which describes how to profit from stock market opportunities.  The investments in this article focus on the profitable Seasonal Anomaly: The Halloween Effect. Stocks & ETFs include: SPDR® S&P 500 ETF (SPY), Russell 2000 Index Fund (IWM), Russell 3000 Index Fund (IWV), Direxion Small Cap Bull 3X – Triple-Leveraged ETF (TNA) and Cliffs Natural Resources Inc. (CLF - Analyst Report).

Learn more about equity anomalies at this site: http://hema.zacks.com/

Here are highlights from our most recent Equity Market Anomalies feature:

Goblins, Ghouls and the Halloween Effect

Halloween is fast approaching and like everyone else, I’m thinking about my costume.  In the past I’ve worn Lucha Libre masks and cowboy outfits, but generally I like it creepy.  One of my favorites was the year when I donned a horned goblin mask, doctor’s coat and carried two very large and old pipe wrenches.  As regular readers of my articles, you know that I can tie the stock market to just about everything and Halloween is no exception. 

Actually, the stock market and Halloween have a long-documented association.  The Halloween Effect is one of many “Seasonal Anomalies.”  Dr. William Ziemba, among others, is well known for his work on seasonal stock market anomalies, including the Halloween Effect.  In a nutshell, the Halloween Effect consists of buying the market six trading days before Halloween and selling come May 1^st.  The market could be bought using either S&P 500 or Russell 2000 futures or ETFs.

In The Handbook of Equity Market Anomalies, Ziemba explains that a buy and hold strategy returned 96% for the S&P 500 and 204% for the Russell 2000 from February 1993 through the end of 2010.  Yet, if you followed the Halloween Effect rules and bought in late October, sold in May and held cash until late October rolled around and rinsed and repeated from 1993 to 2010, you would have earned 373% for the S&P 500 and 494% for the Russell 2000.  These results include both stock dividends and interest earned on a cash position.  Here are the results side by side:

                                                                                    Total Return    

Halloween Effect Russell 2000                          494%              

Halloween Effect S&P 500                                           373%              

Buy & Hold Russell 2000                                            204%              

Buy & Hold S&P 500                                                    96%              

As the above results illustrate, you could have more than doubled your money trading the Halloween Effect as opposed to a Buy & Hold strategy.  You have to be diligent though, and trade by the rules.  One deviation from the strategy, wherein you decide to hold during the summer or wait too long to buy, could significantly change results.  As with any investing strategy, you need to be disciplined.

Over the years, researchers have tired to understand this persistent anomaly.  Some of their theories indicate summer vacations, Seasonal Affective Disorder, and seasonal optimism as reasons for its success.  Most of the research points to changes in investors’ risk tolerances.  Supposedly, investors are more wiling to take risks when they are optimistic.  Stronger risk appetites lead to more cash finding its way into the stock market.  Higher stock returns are, therefore, generally the result.

There are several investment vehicles that allow you to take advantage of the Halloween Effect.  These include the following (Remember: buy right before Halloween and sell on May 1^st each year).

SPY – SPDR® S&P 500 ETF

The SPDR® S&P 500 ETF is a fund that generally corresponds to the price and dividend performance of the S&P 500 Index before expenses.

IWM – Russell 2000 Index Fund

The iShares Russell 2000 Index Fund seeks investment results that correspond generally to the price and dividend performance of the Russell 2000 Index before expenses.

IWV – Russell 3000 Index Fund

The iShares Russell 3000 Index Fund seeks investment results that correspond generally to the price and dividend performance of the Russell 3000 Index before expenses.

TNA – Direxion Small Cap Bull 3X – Triple-Leveraged ETF

For those with a bigger appetite for risk, the Direxion Small Cap Bull 3X – Triple-Leveraged ETF is designed to yield investment results approximately equivalent to triple (300%) the return of an investment in the Russell 2000 Index before expenses.

CLF - Analyst Report – Cliffs Natural Resources Inc.

I actually found a stock that usually performs well from November to April, then very often tanks from May through summer.  Cliffs is a mining and natural resources company which produces iron ore and metallurgical coal products.  There must be some strong seasonality in both iron ore and the stock price of this company.

In conclusion, the next time your neighbors pepper their yards with inflatable ghosts, ghouls and black cats, and your mailbox fills up with invitations to costume and pumpkin-carving parties, consider these signals that it’s just about time to awake your dead cash from its tomb and bring it to life in the stock market. 

If you’d like to learn more about Seasonal, as well as other anomalies, you’re in luck.  The Handbook of Equity Market Anomalies has just been released and it details several winning strategies used by investment pros.  You can also learn more about various market anomalies by visiting a website dedicated to their explanation and discussion: hema.zacks.com.

Now it’s that time of the year again, so create your monster, drink some blood, and get into the market!

Click here to learn more about this market beating anomaly and others.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: http://www.zacks.com/performance.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter: http://twitter.com/zacksresearch

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.Zacks.com

Read the full analyst report on SPY

Read the full analyst report on IWM

Read the full analyst report on IWW

Read the full analyst report on TNA

Read the full analyst report on CLF