Evaluating the Seasonality and Persistence of ETFs Performance and Volatility: Implications for Profitable Investing
40 Pages Posted: 19 Oct 2007
Date Written: July 2007
Abstract
By breaking down ETFs in broad, sector and international market categories as well as in large, medium and small cap classes of capitalization we demonstrate that a substantially positive November effect influences the performance of all ETF market categories and classes of capitalization. We also reveal the existence of a strong reverse December effect along with a modest reverse effect that affect the ETFs' volatility. The modest November effect in risk is accompanied by a strong reverse November effect in tracking error related to all ETF categories and classes. Moreover, we provide slight evidence for persistence in ETFs' November performance and strong evidence for persistence in ETFs' November risk and tracking error. Further research indicates that the investing strategies which respect the November patterns in ETFs' performance can beat the buy and hold strategies on an average and accumulated level during a five-year period and that investors can gain significant returns if they allow themselves to be exposed in greater level of volatility.
Keywords: performance, volatility, seasonality, persistence
JEL Classification: G11
Suggested Citation: Suggested Citation
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