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Season+: A Seasonal Quantitative Investment Strategy
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What we do
Seasonalities in financial markets have been documented for several years. Season+ exploits the positive market bias around specific events, for example the turn of the month or meetings of the Federal Reserve Board.

Why it works
One would think that such well-known effects would have been arbitraged away but this is not the case. The reason can be found in the deeply ingrained behavior of market participants that has not changed much. The turn of the month is a natural point in time to expect positive biases. At the end of the month fund managers tend to liquidate losers, leading to lower prices. At the beginning of the month new money, for example from pension plans, flows in and fund managers have to buy, leading to higher prices. Stock market holidays are subject to a similar effect due to risk aversion of day traders. Around meetings of the Federal Reserve Board a positive drift prevails. These meetings are expected to resolve uncertainty. This in turn leads to rising prices.

What we add
While trading seasonalities is already an interesting strategy in itself, it can suffer very large drawdowns if naively used. Also, the appropriate entry time and the holding period may vary from event to event. We select the appropriate asset to trade among a small universe of potential assets and add some leverage depending on market risk. Deleverage can also be applied. Tight intraday money management mitigates risk from sharp market movements. The result is a higher annualized return and lower drawdown. As a rule, our quantitative models are simple, but effective.

What you can expect
Season+ is an entirely quantitatively managed strategy. No discretionary decisions are taken. The quantitative approach removes emotion from the trading decisions. Season+ is a managed futures strategy. It can, in principle, take long and short positions. However, due to the nature of the seasonal effects the position is always long. Season+ features an attractive annualized return. Also, correlation to the larger stock indices is as low as 0.25. This makes Season+ a good investment to diversify your portfolio as seasonal effects are typically more pronounced in down or sideways markets. Season+ only trades on average a couple of days per month. In total, on average 25 events per year have to be expected. Trades typically last only one day. The exposure to the market is therefore only very short-term. Alternatively the capital can be invested in other strategies during out-of-market times. Season+ at a glance:
Ann. return 11.8%
Ann. volatility 7.6%
Inf. ratio 1.54
Performance Jan. 2005 to Dec. 2016

The Season+ investment platform is currently traded at Acanto Holding, for more information please contact us at info@acantoresearch.com.

Copyright © 2017 Christian L. Dunis. All rights reserved