« GE's Confirms Dividend | Main | The Real Price of Gas »

Mark Hulbert writes:

The Seasonality Timing System (STS), for those of you not familiar with it, traces to research conducted by Norman Fosback in the early 1970s. Fosback, who currently edits a newsletter called Fosback's Fund Forecaster, found that the stock market has a bullish bias around the trading sessions immediately prior to each exchange holiday as well as those at the turns of each month. At all other times, his timing system calls for being out of stocks and safely invested in a money-market fund. It therefore incurs very little risk.

Over the 25-plus years that the HFD has tracked the STS, a portfolio that used it to switch between the DJ Wilshire and T-bills produced an 11.7% annualized return, vs. 10.6% for buying and holding. That's impressive enough, since very few market timing-strategies are able to even match the market's return, much less beat it.

But what makes the STS really shine is that its market-beating return was produced while being in the stock market for only about one third of the days it was open. On a risk-adjusted basis, the STS almost doubles the return of a buy-and-hold.

Posted by edelfenbein at November 18, 2008 11:54 AM