Russell 2000 Rebalancing Trading Strategy (Backtest and Analysis)
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.
Our trading strategy says the average gain for the Russell 2000 in late June is 1.34%. That is well above any random period of the year for the index. The average holding time is 6 trading days.
The equity chart looks like the image shown below from 1988 until today.
You can find more info about this trading strategy here:
https://www.quantifiedstrategies.com/russell-2000-rebalancing-strategy/