This is the time of the year when the media is full of stories about the best six month holding period for stocks. We are told that it is best to buy at the end of October and then to “sell in May and go away.” Do the actual data support this strategy?
We chose the Dow Jones Industrial Average with data back to 1885 to do our study.
We created indexes for each observable six month holding period since 1885 (the New York Stock Exchange was closed from August, 1914 through mid-December, 1914) . These indexes were constructed by calculating the returns for a six month time period based upon the last trading day of the month close data. We began with a base of 100 for each index and linked succeeding six month returns through 2010.
We begin with twelve charts that plot the different indexes created for each six month holding period. Each chart has annualized return data from various beginning dates, a trend line of the index data and a value for the trend line growth of the entire data index. Charts 4 and 8 have some additional comments.
Chart 1
Chart 2
Chart 3
Chart 4
Chart 5
Chart 6
Chart 7
Chart 8
Chart 9
Chart 10
Chart 11
Chart 12
Our data does show that the end of October to end of April six month holding period has been the best six month time period to own the Dow Jones Industrial Average since 1942. Prior to 1942 that time period was not very good. Another time period with very consistent returns over the entire period since 1885 is the end of February to the end of August six month holding period. It is rarely mentioned by the financial media. The following three tables show some additional results of our study.
Table 1
Table 2
Table 3
