1/8/09
The chart shows the correlations between the S&P Composite Stock Index return for each of the 12 calendar months and the return for the immediately following 11-month interval over the entire 1872-2008 sample period. It shows that returns for the months of April, May, August, November and December are about as good as the return for January in predicting returns for the ensuing 11 months. In other words, January is not special.
In summary, evidence from long-run data indicates that the January return for a broad U.S. stock index is weakly predictive of returns for the ensuing February-December. However, the predictive power of January is not appreciably greater in this regard than that of five other months.
It is another historical data we could rely on. Let see how this January does, and so does the year.
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