Stock Strategies with the January Barometer and the Yield Curve

Journal of Investment Management (JOIM), First Quarter 2013

Posted: 20 May 2013

See all articles by Licheng Sun

Licheng Sun

Old Dominion University

Chris T. Stivers

University of Louisville

Ajay Kongera

Independent

Date Written: May 17, 2013

Abstract

The January Barometer states that the sign of the stock-markets returns in January can predict the subsequent 11-month stock-market return over February to December. Cooper et al. (2010) show that the best way to use the January Barometer is to be long following positive Januarys and invest in T-bills following negative Januarys. In this study, similar to the January Barometer, we find that the 11-month average return following upward-sloping yield curves is significantly higher than the 11-month average return following downward-sloping yield curves. Further, we find that trading strategies that combine the trading signals from the January Barometer and the yield curve comfortably outperform the best strategy that relies on the January Barometer alone. We show that the combined January barometer-yield curve strategy has lower risks and higher Sharpe ratios.

Keywords: January Barometer, yield curve, trading strategies

JEL Classification: G00

Suggested Citation

Sun, Licheng and Stivers, Chris T. and Kongera, Ajay, Stock Strategies with the January Barometer and the Yield Curve (May 17, 2013). Journal of Investment Management (JOIM), First Quarter 2013, Available at SSRN: https://ssrn.com/abstract=2266660

Licheng Sun (Contact Author)

Old Dominion University ( email )

Strome College of Business
Department of Finance
Norfolk, VA 23529-0222
United States

Chris T. Stivers

University of Louisville ( email )

Finance Dept., College of Business
University of Louisville
Louisville, KY 40292
United States
502-852-4829 (Phone)

Ajay Kongera

Independent ( email )

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