In this post, we test how the Russell 2000 rebalancing at the end of June leads to a rally in the last few days of June. It turns out the seasonality is for real. Our result suggests the Russell 2000 performs much better at the end of June than any other period of the year. We present a Russell 2000 rebalancing strategy based on the imbalances and effects.
We backtest the following trading rules:
* Buy on the close on the first trading day after the 23rd of June.
* Sell on the close on the first trading day of July.
The equity chart (shown below) looks like this from 1988 (the earliest date we have data for the Russell 2000 index) until today.
We published a detailed trading performance metrics of Russell 2000 Rebalancing Trading Strategy and effect when hedged with the S&P 500 here >>
https://www.quantifiedstrategies.com/russell-2000-rebalancing-strategy/