Day of the week grid

We have previously looked at data to see if there are any discernible patterns in market returns by day of the week. The following table presents another way of studying this.

The table shows the daily returns of the FTSE 100 Index for every day so far in 2016 (up to last Friday, 28 Oct). Positive returns are highlighted in green, negative returns in red. (White cells indicate a market holiday.)

Day of the week grid [2016 wk43]

Observations:

  1. So far in 2016 the longest run of positive (or negative) returns for a day started in the 10th week of the year when day returns for eight consecutive Wednesdays were positive.
  2. For 11 weeks, the day returns on Fridays were the opposite sign to that on the previous day (Thursday). This run ended last Friday (when both Thursday and Friday saw positive returns).

Other articles looking at returns on days of the week.

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Last trading day of October

Next Monday will be the last trading day (LTD) of October.

Historically, the last trading day of October has been the strongest LTD of any month in the year. Since 1984 the market has on average risen 0.46% on the LTD of October, with positive returns in 69% of all years.

The following chart shows the FTSE 100 Index returns for every October LTD since 1984.

FTSE 100 last trading day of October [1984-2015]

As can be seen on the chart the market only fell twice on the October LTD in the 19 years from 1984 to 2002. One possible reason for this may have been that November is the start of the strong six month period of the year (this is part of the Sell in May effect), and investors could have been buying equities at this time in anticipation of that.

However, in recent years this pattern of behaviour has changed. Quite dramatically so – in the last seven years the market has only risen once on the October LTD. Last year (2015) the FTSE 100 Index was down 0.5% on the last trading day of October.

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High, Low, Close

Analysis of the daily close  of the FTSE 100 Index and the day’s high and low. 

The following table shows the frequency with which the FTSE 100 closes within a certain percentage of the high (or low) of the day. For example, since 1985 the FTSE 100 Index has closed within 10% of its daily high 20.8% of all days, and it has closed within 1% of its low 5.6% of all days.

  10% 5% 1%
Top (%) 20.8 15.1 9.8
Bottom (%) 14.5 9.6 5.6

It’s interesting to note that for one in 10 days the index closes within 1% of its high for the day.

The following day

Continuing this analysis of where the index closes relative to the Hi-Lo range of the day, the following table shows the performance of the FTSE 100 Index on the following day.

For example, on the days when the index closes within 10% of its low for the day on average the index return is -0.005% the following day; and when the index closes within 1% of its high for the day on average the index return is 0.167% the following day.

  10% 5% 1%
Top (%) 0.111 0.132 0.167
Bottom (%) -0.005 0.001 0.013

 


The above is an extract from the Harriman Stock Market Almanac 2017.

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FTSE 250/100 Ratio

The following chart shows the ratio of the FTSE 250 Index divided by the FTSE 100 Index since 1985. For example, yesterday’s close for the FTSE 250 Index was 18,342.1 and for the FTSE 100 Index it was 7074.3; dividing the former by the latter gives a ratio value of 2.59 (the last value plotted on the chart).

FTSE 250-100 Ratio [1985-2016]

As can be seen, the ratio fluctuated in a sideways range from 1985 to 1999. And then the great out-performance of the FTSE 250 over the FTSE 100 began (on 18 Jan 1999 to be precise).

Over the following 16 years to today, while the FTSE 100 Index increased 16%, the FTSE 250 gained 274%.

The following chart zooms in to show the FTSE 250/100 ratio for the more recent period since 21012-2016.

FTSE 250-100 Ratio [2012-2016]

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UK equity indices returns 2016 3Q & YTD

2016 3Q

The following chart plots the performance of UK equity indices in the third quarter 2016.

UK equity index returns 2016 3Q

The data for the chart is given in the following table.

Index Rtn(%)
FTSE AIM 100 16.3
FTSE AIM All-Share 15.7
FTSE Fledgling 12.8
FTSE TechMARK Focus Index 12.0
FTSE SmallCap 11.3
FTSE 250 9.8
FTSE TechMARK All Share 8.4
FTSE All-Share – Total Return 7.8
FTSE 100 Index – Total Return 7.1
FTSE All-Share 6.8
FTSE 350 6.7
FTSE4Good UK 6.7
FTSE4Good UK 50 6.3
FTSE 100 6.1
FTSE UK Dividend Plus 5.6

2016 3Q YTD

The following chart plots the performance of UK equity indices over the first 3 quarters of 2016.

UK equity index returns 2016 3Q YTD

The data for the chart is given in the following table.

Index Rtn(%)
FTSE AIM 100 16.3
FTSE AIM All-Share 15.7
FTSE Fledgling 12.8
FTSE TechMARK Focus Index 12.0
FTSE SmallCap 11.3
FTSE 250 9.8
FTSE TechMARK All Share 8.4
FTSE All-Share – Total Return 7.8
FTSE 100 Index – Total Return 7.1
FTSE All-Share 6.8
FTSE 350 6.7
FTSE4Good UK 6.7
FTSE4Good UK 50 6.3
FTSE 100 6.1
FTSE UK Dividend Plus 5.6

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FTSE 100 and FTSE 250 Quarterly Review – September 2016

After market close on 31 August 2016 FTSE Russell confirmed the following changes to the FTSE 100 and FTSE 250 indices. The changes will be implemented at the close Friday, 16 September 2016 and take effect from the start of trading on Monday, 19 September 2016.

FTSE 100

Joining: Polymetal International [POLY]

Leaving: Berkeley Group [BKG]

FTSE 250

Joining: Berkeley Group Holdings [BKG], GVC Holdings [GVC], Hunting [HTG]

Leaving: Polymetal International [POLY], Pendragon [PDG], Circassia Pharmaceuticals [CIR]

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FTSE 100 for US dollar investors in 2016

The following chart plots the FTSE 100 Index for the period 1 January 2016 to 11 July 2016. It also plots the Index priced in US dollars (i.e. it shows the returns a US dollar investor would see over this period).

FTSE 100 v FTSE (USD) [Jan-Jul 2016]

Today, the FTSE 100 Index closed at 6682, an increase of +9.7% from 1 January 2016.

Adjusted for the GBPUSD rate, the FTSE 100 closed today at 5886 (in dollar terms),  a decrease of -5.7% on the start of the year.

 

 

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UK equity indices returns 2016 2Q & 1H

2016 2Q

The following chart plots the performance of UK equity indices in the second quarter 2016.

UK equity index returns 2016 2Q

 

The data for the chart is given in the following table.

Index Rtn(%)
FTSE 100 Index – Total Return 6.5
FTSE 100 5.3
FTSE4Good UK 50 5.0
FTSE All-Share – Total Return 4.7
FTSE 350 3.7
FTSE All-Share 3.5
FTSE4Good UK 3.5
FTSE TechMARK All Share 2.9
FTSE AIM 100 1.2
FTSE TechMARK Focus Index 1.0
FTSE AIM All-Share -0.4
FTSE UK Dividend Plus -1.5
FTSE SmallCap -1.6
FTSE Fledgling -2.2
FTSE 250 -3.9

 2016 1H

The following chart plots the performance of UK equity indices in the first half 2016.

UK equity indices 2016 1H

The data for the chart is given in the following table.

Index Rtn(%)
FTSE 100 Index – Total Return 6.62
FTSE All-Share – Total Return 4.27
FTSE 100 4.2
FTSE 350 2.27
FTSE All-Share 2.07
FTSE4Good UK 50 1.99
FTSE4Good UK 0.84
FTSE TechMARK All Share -1.17
FTSE UK Dividend Plus -2.32
FTSE TechMARK Focus Index -2.85
FTSE Fledgling -3.41
FTSE SmallCap -3.52
FTSE AIM 100 -4.09
FTSE AIM All-Share -4.19
FTSE 250 -6.65

 

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FTSE 100 around FOMC announcements

The Federal Open Market Committee (FOMC) is the monetary policy-making body of the U.S. Federal Reserve System. Since 1981 the FOMC has had eight scheduled meetings per year, the timing of which is quite irregular, The schedule of meetings for a particular year is announced ahead of time [calendar here].

Starting in 1994, the FOMC began to issue a policy statement (“FOMC statement”) after the meetings that summarised the Committee’s economic outlook and the policy decision at that meeting. The FOMC statements are released around 14h15 Eastern Time.

Before 1994 monetary policy decisions were not announced; investors therefore had to guess policy actions from the size and type of open market operations in the days following each meeting. But since 1994 there has been far greater transparency over both the timing and the motivation for monetary policy actions.

This has led to a number of academic papers investigating the influence of these FOMC statements on financial markets. One such paper[1] found large average excess returns on U.S. equities in the 24-hour period immediately before the announcements (an effect the paper called the “Pre-FOMC Announcement Drift”). In other words, equities tended to be strong just before the FOMC statement. Further, these excess returns have increased over time and they account for sizable fractions of total annual realized stock returns. Quantifying this the paper says,

[since 1994] the S&P500 index has on average increased 49 basis points in the 24 hours before scheduled FOMC announcements. These returns do not revert in subsequent trading days and are orders of magnitude larger than those outside the 24-hour pre-FOMC window. As a result, about 80% of annual realized excess stock returns since 1994 are accounted for by the pre-FOMC announcement drift

A quite extraordinary finding!

And the relevance to UK equities is…?

The above quoted paper also found that such pre-FOMC excess returns occurred also in major international equity indices.

Let’s see if that is the case.

The following chart shows the average daily returns for the FTSE 100 Index for the seven days around the FOMC statements for the period 1994-2014. The seven days cover the three days leading up to the statement, the day of the statement itself A(0), and the then the three days after the statement. Given that the FOMC statement is usually released around 18h15 GMT (i.e. after the UK market has closed), A(0) can be taken as occurring in the 24 hours before the statement.

FTSE 100 around FOMC announcements

The result is quite clear, the average daily return for A(0) is 0.33%, over ten times greater than the average daily return on all other days. This does support the claim in the above referenced paper. It might also be interesting to note the weakness in equities on the day prior to the FOMC statement.


[1] David O. Lucca, Emanuel Moench, “The Pre-FOMC Announcement Drift” (2013)

Further articles on the Fed Rate and FOMC announcements.

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FTSE 100 and FTSE 250 Quarterly Review – June 2016

After market close on 1 June 2016 FTSE Russell confirmed the following changes to the FTSE 100 and FTSE 250 indices. The changes will be implemented at the close Friday, 17 June 2016 and take effect from the start of trading on Monday, 20 June 2016.

FTSE 100

Joining: Hikma Pharmaceuticals [HIK]

Leaving: Inmarsat [ISAT]

FTSE 250

Joining: Ascential [ASCL], CMC Markets [CMCX], Countryside Properties [CSP], CYBG [CYBG], Hill & Smith Hldgs [HILS], Metro Bank [MTRO], Smurfit Kappa Group [SKG]

Leaving: Highbridge Multi-Strategy Fund [HMSF], Interserve [IRV], Jimmy Choo [CHOO], Lookers [LOOK], Melrose Industries [MRO], Northgate [NTG], Ophir Energy [OPHR]

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