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Three seasonal anomalies

Stephen Eckett analyses three different seasonal anomalies of three different frequencies, and links them together with a word of caution on transaction costs
Three seasonal anomalies

Earlier this year, the FTSE 100 rose in the second week of February. The following week, it fell. The week after that the market increased. This pattern of alternating positive and negative week returns continued for another three weeks. Is this an established behavioural pattern of stocks ­alternating weeks of positive and negative returns?

The short answer is no. Before February this year, the previous time the market had alternated the sign of weekly returns for six consecutive weeks had been in 2015. It’s a pattern that occurs roughly once a year.

However, while extended runs of alternating week returns may be fairly rare, there is an odd characteristic of week returns. The chart below shows the value of two portfolios, defined as follows:

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