UFO Info Week-End

None is universal and nobody can expect to make money automatically by betting on them

None is universal, and nobody can expect to make money automatically by betting on them.On the other hand, the knowledge prices have behaved in a certain way many times in the past should give investors confidence the odds are in their favour if they try to recapture the effect.If you sold in May, page 26. Rumours are again flying that the Woolwich intends to float on the stock market. Any such move, which would take at least two years, would transform the building society into a bank with a market value of about pounds 2.6bn. There is also the possibility that anomalies that did exist in the past and made money for investors tend to disappear as soon as they are documented and become generally known. To some extent, this has already happened with the January effect, which seems to be gradually moving backwards into December as more and more investors become aware of it.Nevertheless, Mr Schwartz concludes that, whatever the academics may tell you, there is evidence patterns of predictable stock price movements do exist. This holds true even when the date of the Budget has been moved.As a statistician, he knows as well as any academic the pitfalls of assuming that just because a price movement pattern has occurred in the past, it will recur. One interesting one is the trend for the stock markets to fall in the week before the Budget.

This, says Mr Schwartz, is one saw that really has stood the test of time. When share prices rise in January, further rises often occur in the rest of the year – and the reverse holds when prices fall.Mr Schwartz has many other examples of persistent trends. It is true that years like 1987 have given October a bad reputation. But again the problem is that the month has experienced some bad falls It is still profitable over the long run. What is more, the years of “big hits” are often well flagged in advance.o “As January goes, so goes the year”. What actually gives May its bad reputation is that in a handful of well-documented years it fell very sharply.o “Bull market bashes end with October crashes”.

The conventional wisdom here, says Mr Schwartz, is simply wrong. The market has actually risen seven years in a row in May since 1989. For example, here are his comments on some of the market’s oldest and most trusted adages:o”Sell in May and go away”. His month- by-month analysis of how markets move through the year is now published as an annual, called the Schwartz Stock Market Handbook (perhaps inevitably, the boy from the Bronx also publishes this himself: call 01453 731 173 for details).Mr Schwartz’s labours make for fascinating reading. With the energy of a self-confessed “boy from the Bronx”, Mr Schwartz sat down in his study in the English countryside to make an exhaustive analysis of the daily movements in the UK stock market over the last 75 years.Some years later, he has the results – an encyclopaedic quarry of trends and seasonal patterns in the behaviour of the UK stock market. Such a strikingly divergent outcome is difficult to explain in either logical or behavioural terms, and is inconsistent with efficient markets theory.Another man who thinks there is more to market anomalies than the academics would have you believe is David Schwartz, an American statistician who became interested in the stock market after selling his market research business in the late 1980s.

By contrast, someone who took his money out of the market each year in September but remained fully invested for the other 11 months of the year would by now have turned each $1 into more than $400. His research, which involved combing through the movements of the Dow Jones Index as far back as 1890, showed conclusively that Septemberhas been a lousy month for investors, not just in America but in other big stock markets.Professor Siegel calculates that someone who started investing in Wall Street in 1890 and put his money into the stock market only in September each year would, by 1994, have lost three quarters of every dollar invested. This is the well- documented fact that share prices tend to perform better than average in that month. This, the academics readily concede, is not compatible with the view that the stock market is perfectly efficient.Now we have some more evidence to the same effect. This month, a leading financial economist in the United States, Professor Jeremy Siegel of Wharton Business School, documented there is also a clear “September effect”.