On this 21st of December, when the Nifty shed 400+ points in a single day, there was a lot of panic on the news etc.
I heard an analyst say that this could be because of the "December Effect" !
What is this December Effect and why you should know about it ?
1/n
#marketcrash
I heard an analyst say that this could be because of the "December Effect" !
What is this December Effect and why you should know about it ?
1/n
#marketcrash
The December Effect, more commonly known as the "January Effect" is a seasonal decrease in share prices in the month of December and an increase in prices in the month of January !
This is a very popular hypothesis but what's the logic behind it ?
2/n
#january #december
This is a very popular hypothesis but what's the logic behind it ?
2/n
#january #december
The logic behind this is that in Dec, investors sell there loss making shares to set off taxes against capital gains, causing the market to fall.
Then, in the next year buy those shares back, thus causing a rise in prices in January !
Sounds legit ! 🤔
3/n
#taxharvesting
Then, in the next year buy those shares back, thus causing a rise in prices in January !
Sounds legit ! 🤔
3/n
#taxharvesting
Since I (being a CA student 😜) don't believe in these hearsay theories, decided to test it myself and personally verify it before preaching it.
For this I used, monthly OHLC data of Nifty 50 for the past 24 years i.e from 1996-2019 !
4/n
#OHLC #nifty50
For this I used, monthly OHLC data of Nifty 50 for the past 24 years i.e from 1996-2019 !
4/n
#OHLC #nifty50
The results were pretty shocking !
If you would have bought the market in the beginning of Dec and sold by the end of it, you would have made an average profit of 3.22% in the past 24 years.
71% of the time, Nifty went up in Dec !
5/n
#profit
If you would have bought the market in the beginning of Dec and sold by the end of it, you would have made an average profit of 3.22% in the past 24 years.
71% of the time, Nifty went up in Dec !
5/n
#profit
Surprisingly, if you did the same thing in January, you would have made an average loss of -0.16%. Nifty went up only 50% of the time !
So this totally nullifies the so called "January Effect" !
At least it hasn't worked in the past 24 years !
6/n
#Null
So this totally nullifies the so called "January Effect" !
At least it hasn't worked in the past 24 years !
6/n
#Null
I tested the same thing on the broader Nifty 500 index and the results were more or less the same !
So what is the moral of the story ?
That you shouldn't blindly believe on these theories which sound correct. Instead you should verify them before betting your money on it.
7/n
So what is the moral of the story ?
That you shouldn't blindly believe on these theories which sound correct. Instead you should verify them before betting your money on it.
7/n
Hope you learned something new from this thread 😊
Tell me in the comments if you want to see the Excel Sheet on which I tested. I would also appreciate if you have any feedbacks/suggestions 👇
Do not forget to SAVE and SHARE this post !!
Until next time 🙏
n/n
#signingoff
Tell me in the comments if you want to see the Excel Sheet on which I tested. I would also appreciate if you have any feedbacks/suggestions 👇
Do not forget to SAVE and SHARE this post !!
Until next time 🙏
n/n
#signingoff
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