SELL in May and go away?

According to this saying, the month of May signals the start of a bear market. Stock returns should be lower from May through to September than during the rest of the year.

There are two different endings to the saying. The first of these is: “but remember to come back in September”; the second is: “but buy back on St. Leger Day”—in which “St. Leger Day” refers to the date of a classic horse race run at Doncaster in England every September (Bouman & Jacobsen, 2002).

For decades the stock market adage “SELL in May and Go Away” has seemed to be good investment advice, especially for long-term traders, as it can statistically be proven that the adage holds. In the paper “Sell in May and Go Away” Just Won’t Go Away written by Andrade, Chhaochharia, & Fuerst (2013) this strategy is performed against a simple buy-and-hold strategy. The following has been found:

On average across markets, stock returns are about 10 pps higher for November-April than May-October.

The above figure, taken from the paper by Andrade, Chhaochharia, & Fuerst (2013), clearly illustrates that returns for the period of November-April are higher over time than for the period May-October.

If this strategy had been executed each year since 1994, on the S&P 500, the overall result could be considered as staggering.

The graph shows a huge difference in the (accumulated) returns when May-September is compared to October-April. Based on historical data, it seems reasonable to argue that for long-term, passive investors the “Sell in May” strategy is a legitimate one. In other words, statistically we tend to acknowledge the fact that a volatile, sideways-moving market is what history implies.

What causes the puzzle?

For now there is no clear-cut answer to the question of what causes this anomaly. And most likely there never will be. Although present not only in the equity risk premium, but also in the size, value, PX carry trade, equity volatility risk, and credit risk (corporate and sovereign) premiums the “Sell in May” seasonality should be seen as ultimately “irrational”.

The most likely explanation for this effect over time is a psychological one. As most of the investors know about the adage, they will trade according to this seasonality. As fear and greed are quite dominant factors within the stock market, one could argue that by speaking...“rumour sells”…about “the puzzle”, a self-fulfilling prophecy is created.

SELL in May and go away in 2014?

*** We strongly recommend, you do your own research ***


Bouman, S., & Jacobsen, B. (2002). The Halloween indicator," Sell in May and go away": Another puzzle. American Economic Review, 1618-1635.

Andrade, S. C., Chhaochharia, V., & Fuerst, M. E. (2013). “Sell in May and Go Away” Just Won’t Go Away. Financial Analysts Journal, 69(4), 94-105.


EconomicTimesEMI,  BusinessInsiderEWN

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Ivo Furda

Main interests of Furda are macro­economic developments and trends.

This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice. You are responsible for your own investment decisions.

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