Sell in may and go away

by Business0 comments

November is the time when a notable number of investors wake up from their winter slumber to begin the real hunt in the financial jungle. This unconventional division of the year into a part with increased activity and passive rest was based on the American saying “Sell in may and go away“. At the same time, this well-worn platitude, passed from mouth to mouth, is closer to a mysterious tale than to an indisputable truth supported by a variety of studies.

The short legend of…

Sell in may and go away is a short story about why it’s a good idea to withdraw from the market as the days grow longer. A cluster of proponents of this idea profess that inexplicably, and even contradicting any concept of efficient markets, returns during the indicated period deviate significantly from the average. The period from May to October is supposedly the time when investors perform the lowest in the stock market. The identified correlation, as it were, conceived to impose a new order of nature on a certain homo-investorus in such a way that he falls into investor slumber for the time of the stock market failure.

Support in the data

Since the 1990s, the NYE 500 Index of the largest companies has averaged returns of 2% between May and October, where in the second half of the year the performance of expected values reaches up to 7%. It is worth noting that the NYE is a U.S. stock exchange, and the unification of theses on a global scale, due to the selective occurrence, treads on the narrow edge of acceptability. In view of this, many traders decided to undertake research on their own to make a definitive verdict – whether sell in may exists on their home exchange.

The results?

November’s awakening and May’s equivalent sell-in may were studied over the period 2011-2020. The following results show the rate of return obtained on the S&P 500 index over this period.

Source: LPL Research

The basic question is, do the financial benefits received represent a BIG or LOW rate of return? Can a 2.9% rate of return represent an investor’s expected rate of return, and can it be an argument in battles against the efficiency of markets? Considerations of investor expectations are as much filled with a dose of subjectivity as anomalous polemics. Thus (in my opinion), research, too, will never provide a clear answer, for its interpretation still lies within the fluid bounds of bias.


Whether you side with the anomalio-fanatics or the anomalio-skeptics, the reasons that condition the occurrence of (faint) visible signs of stock market extraordinariness seem interesting.

First, the market, as a set of buying and selling transactions, used to put agriculture at the center. Consequently, modern markets (already rather financial) may still be influenced by the seasonality evident in agriculture. However, today the importance of agriculture in financial markets is so much more marginal that it may no longer exert the significant behavioral patterns it once did.

Second, the alleged bull market in November through late April/May may be related to tax issues. In the United States, income tax (CIT) is settled by mid-April, while in Poland it is settled by the end of March. Arguably, this could provide an apex for increased investment activity, resulting in a lower tax base. An additional argument is that any business bonuses are generally paid at the end of the year, so that stock market consumption can occur in the following months.


Nevertheless, the most interesting issue is the answer to the following question: does “sell in may and go away” occur because we talk about it, or because “sell in may and go away” occurs and we consequently, talk about it?

Paulina Słupska

Paulina Słupska

An analyst by education. Although I believe that analysis is the domain of exact scientists, it would not exist without creativity. I try to pour my creative outlook on the world onto e-paper. I'm one of those dreamy pragmatists who rely on constructiveness but, at the same time, let their imagination run wild. In my spare time, in addition to posing questions and refuting theses, I engage in more mundane activities. Sometimes it's yoga, sometimes process automation, sometimes graphic design, and sometimes spiritual development. It varies from time to time.

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