The End Of The Year Rally In Stocks (Santa Claus Rally/Effect Strategy)

Our trading strategy backtests reveal that there is a Santa Claus rally in the stock market. The stock market shows significantly better performance during Christmas and the days leading up to the new year. The Santa Claus rally is no myth or fiction.

The strategy is pretty simple and we make the following trading rules:

- The last four days of December and the first three days of January are often referred to as the Santa Claus market rally (effect).

We test if the hypothesis is true. Below is the equity chart of the S&P 500 from 1960 until today (100 000 invested in 1960 and compounded/reinvested)

The strategy has produced 0.7% per trade, the win ratio is 66%, the average winner is 2.1%, the average loser is -2%, the profit factor is 2, and max drawdown is 9%.

We test another twist to the Santa Claus Rally In The Stock Market hypothesis and increase the holding period. Let's check how it performed >>

https://www.quantifiedstrategies.com/santa-claus-rally-in-stocks/