A better 'autopilot' than Sell-in-May? 40 years in the US market

Sell-in-May, known also as the Halloween effect, continues to persist in many parts of the world and to puzzle researchers and practitioners. Prior research found that in a few certain countries, this effect is not statistically significant or does not exist. This article shows that although Halloween effect is significant in the United States, it can be quite easily replaced by another profitable calendar strategy: holding the market index just for the months of March and November each year and investing the money in the risk-free asset for the rest of the year. This strategy may not persist in the future, however it is puzzling how it prevailed over 43 years in the S&P-500 since 1970. We show that the superior performance of this strategy compared with its natural benchmarks is robust using risk-adjusted measures over multiple sub-periods in our sample.