This updates the previous analysis of the historical behaviour of the FTSE 100 Index since 1984 for the nine days around Christmas and New Year. The days studied were:
- Days 1-3: the three trading days leading up to Christmas.
- Days 4-6: the three trading days between Christmas and New Year.
- Days 7-9: the first three trading days of the year.
The following chart shows the average returns for these nine days around Christmas and New Year.
- The average daily change of the FTSE100 index from 1984 for all days is 0.03%, so it can be seen that all nine days around Christmas and New Year are stronger than the average daily returns for the rest of the year.
- Generally, the market strength increases to the fourth day (the trading day immediately after Christmas) – this is the strongest day of the whole period, when the markets increases 83% of years since 1984 with an average return on this day of 0.47%. Although it should be noted that the standard deviation is the second highest on this day, meaning that the volatility of returns is greatest (the index actually fell 3% on this day in 1987 and 2002).
- The weakest day in the period is the third day of the New Year.
- The new year generally starts strongly on the first day, with performance trailing off the following two days.
The following chart shows the proportion of returns that are positive for each of the nine days.
The profile is similar to that for the average returns: the market is increasingly strong to the first day after Christmas, and then drops off after that.
To check the persistency of these results, the following chart compares the average daily returns for each day for the period 1984-2015 (i.e. as above) with the shorter period 2000-2015.
Broadly, the behaviour in the last 15 years has been similar to that for the longer period since 1984. The one obvious difference has been the extraordinarily strong average returns on the first trading day of the year seen since 2000.
Extract taken from the newly published UK Stock Market Almanac 2016.