Chinese New Year – year of the rooster

This coming Saturday will be the start of the Chinese New Year.

The following chart plots the average performance of the S&P 500 Index for each animal year since 1950. For example, Ox years started in 1961, 1973, 1985, 1997, 2009; and the average performance of the market in those (Chinese) years was +14.0%.

NB. The Chinese calendar is based on the lunar year cycle and so performance has been calculated for each lunar year – not the corresponding calendar year.

Chinese calendar and S&P 500 [1950-2017]

The Chinese New Year starting this Saturday will be the Year of the Rooster!

This is not necessarily good news for investors. Since 1950 rooster years have had the worst average returns of the S&P 500 Index of any of the Chinese zodiac animals. Over the last 50 or so years the average lunar year return for rooster years has been -4.1%.

The year just ending was the year of the monkey. On average monkey years have seen an S&P 500 return of 9.8%. In the monkey year just passed the actual S&P 500 return was 22.5%.


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Chinese New Year – year of the goat

Today is the start of the Chinese new year.

The following chart plots the average performance of the stock market for each animal year since 1950. For example, Ox years started in 1961, 1973, 1985, 1997, 2009; and the average performance of the market in those (Chinese) years was +14.0%.

NB. The Chinese calendar is based on the lunar year cycle and so performance has been calculated for each lunar year – not the corresponding calendar year.
Chinese calendar and S&P 500 average annual returns (1950-2015)
The Chinese New Year starting this week is…the Year of the Goat – which has been the best Chinese lunar year animal for the stock market.

The Chinese calendar is therefore forecasting (if history is a guide) the market will increase 17.9% from 19 February 2015 to 7 February 2016.

Note: There is some confusion in the Chinese astrological calendar over whether this is the year of the goat, the sheep, or the ram. If it turns out that this is the year of the ram, then the above figures may not provide an accurate forecast for the market in the coming year.

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Chinese New Year – year of the horse

When we look at the annual performance of the stock market we usually take our start and end points as 1 January and 31 December. For example, a long-term chart of an index will normally plot the index values on 31 December for each year.

But using different start and end points may be interesting. While the overall performance of the market will obviously not change, the path to the final point may show up differently, and thus possibly reveal a pattern of behaviour not previously noticed.

This week sees the start of the Chinese New Year on 31 January. The start of the Chinese Year moves around (on the Western calendar) from year to year, but always falls between 21 January and 21 February. The calculation of the actual date of the Chinese New Year is sinologically complex. For example,

Rule 5 In a leap suì, the first month that does not contain a zhongqì is the leap month, rùnyuè. The leap month takes the same number as the previous month.

That quote comes from a 52-page academic paper, The Mathematics of the Chinese Calendar (Aslaksen, 2010). However, we shall skip lightly over such details and focus on a key aspect of the Chinese calendar which is the sexagenary cycle. This is a combination of 10 heavenly stems and the 12 earthly branches. The branches are often associated with the sequence of 12 animals (at last – the animals!) Cutting to the chase, the Chinese calendar encompasses a 12-year cycle where each year is associated with an animal.

Can we detect any significant behavioural patterns in the stock market correlated with the sexagenary cycle? In other words, are there monkey years in the market?

The following chart plots the average performance of the S&P 500 Index for each animal year since 1950. For example, Ox years started in 1961, 1973, 1985, 1997, 2009; and the average performance of the market in those (Chinese) years was +14.0%.

Chinese calendar and S&P 500 average annual returns (1950-2013) As can be seen the best performing market animals have been the goat and dog. And, coincidentally (or is it!), the worst performing animals have been the rooster (perhaps a mistranslation of turkey?) and snake (snakes and ladders…).

The Chinese New Year starting this week is the year of the horse, in which the S&P 500 has had an average annual return of 6.7% since 1950.

Reference

Helmer ASLAKSEN, The Mathematics of the Chinese Calendar, 2010

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