Analysis of historical performance data for the SPDR S&P 500 ETF Trust (NYSEARCA:ASX:) revealed that certain months have consistently delivered higher returns than others since January 1996, according to Brett Friedman, Winhall Risk Analytics/OptionMetrics contributor.
The study indicated that April, October, and November are the standout months for positive returns, while February and September typically see lower performance.
The examination of SPY’s monthly and yearly nominal and risk-adjusted returns also extended to historical implied volatility to discern any potential patterns. The findings challenge the common belief that market performance is not tied to specific times of the year.
Notably, March and October exhibited the widest range of returns, hinting at a higher frequency of extreme market events during these periods.
In assessing the risk associated with these returns, the Sharpe Ratio was used as a key metric. This measure adjusts nominal returns by accounting for risk, quantified through standard deviation.
The analysis of Sharpe Ratios alongside nominal returns revealed that higher returns in the more favorable months did not correspond with increased risk. Conversely, the months with the poorest performance also did not align with higher risk levels.
For options traders, the study highlighted a regular pattern in the SPX implied volatility, which typically peaks in March and November, suggesting a seasonal trend. Additionally, implied volatility often reaches its lowest point in July and peaks in October.
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