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25 years experience in Quant research, portfolio management, and stock market data analytics. 15 years experience in index trading / ETF strategist. Risk manager. Mean revision / time series / seasonal studies applied towards general market trends with a focus on long term format.
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  • Market Map Risk Profile Years Vs. Negative Januarys 0 comments
    Feb 2, 2014 10:47 PM

    Every year at the end of January, the financial press brings up what is known as the "January barometer"en.wikipedia.org/wiki/January_barometer. As the Market Map model doesn't utilize the "January barometer" in it's algorithms, it is interesting to examine the "Risk Profile" years (as presented in the article linked at the end of this instablog) in the context of the "January barometer".

    The following tables show all risk profiles and the correlated performance of years when the month of January was negative.

    Table 1 shows "Neutral Risk Profile" years

    Neutral Risk years  
       
    excl. dividendsNegative
    Yearyear return

    January

    years

       
    192611.5% 
    192737.1% 
    192847.5% 
    1937-38.73% 
    1939-5.34%-5.34%
    1953-6.60%-6.60%
    1957-14.30%-14.30%
    1960-3.00%-3.00%
    19655.60% 
    1966-13.10% 
    19687.70%7.70%
    1973-17.40%-17.40%
    1977-11.50%-11.50%
    19841.40%1.40%
    199826.70% 
    2014??????
       
    Cum27.5%-49.0%
    Avg1.8%-6.1%

    Table 2 shows "Favorable Risk Profile" years

    Table 2

    Favorable 
    market  
    trend years 
    excl. divs Negative
     ReturnJanuary
       
       
    192427.1% 
    192525.8% 
    1932-14.81% 
    193344.93% 
    1934-5.00% 
    193540.00% 
    193630.08% 
    193823.58% 
    1941-17.92% 
    194212.64% 
    194319.39% 
    194413.68% 
    194530.08% 
    1947-1.96% 
    19482.00%2.00%
    19499.15% 
    195027.80% 
    195116.30% 
    195211.80% 
    195445.00% 
    195526.40% 
    195838.10% 
    19598.50% 
    196123.10% 
    196318.90% 
    196416.70% 
    196720.10% 
    197110.80% 
    197215.60% 
    197531.50% 
    197619.10% 
    197912.30% 
    198020.00% 
    198317.30% 
    198526.30% 
    198614.60% 
    198812.40% 
    198927.30% 
    199126.30% 
    19937.10% 
    1994-1.50% 
    199534.10% 
    199620.30% 
    200326.40%26.40%
    20049.00% 
    20053.00%3.00%
    200613.60% 
    20073.50% 
    200921.30%21.30%
    201213.4% 
    201329.6% 
       
       
    Cum904.0%52.7%
    Avg17.7%

    13.2%

       

    Table 3 shows "High Risk Profile" years

    Table 3

    High Risk years 
       
       
       
    excl. dividends 
    Yearyear return
       
    1930-28.84% 
    1931-47.06% 
    1940-14.52%-14.52%
    19562.60%2.60%
    1962-11.80%-11.80%
    1969-11.40%-11.40%
    19700.10%0.10%
    1974-29.70%-29.70%
    19781.10%1.10%
    1981-5.40%-5.40%
    198214.80%14.80%
    1990-6.60%-6.60%
    2000-13.00%-13.00%
    2001-23.40% 
    2002-38.50%-38.50%
    2008-10.10%-10.10%
       
       
    Cum-221.7%-122.4%
    Avg-13.9%-9.4%

    As we can see, negative Januarys are not correlated with negative returns during "Favorable Risk Profile" years. On the flip side, negative Januarys are highly correlated with negative market performance during "High Risk Profile" years. As the model has indicated 2014 as a "neutral risk profile" year and has allocated capital to "cash" seekingalpha.com/article/1965171-market-map-model-allocates-to-cash, we can expect a somewhat negative slant to the year's performance, statistically.

    Risk Profile article seekingalpha.com/article/1738582-market-map-model-1-risk-profiles

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