Perspectives on “sell in May and go away”

A look at recent evidence and implications

Abstract

This study offers three perspectives on the quote “sell in May and go away.” First, it tests the annual performance of switching from four equity mutual funds to U.S. Treasury Bills during the historically low-return period of May 1 to October 31 against that of the buy-and-hold strategy from November 1 to October 31. Second, it examines the switching strategy during the two bear and two bull markets occurring from 2000 to 2016. Third, it tests the impact of taxes on the switching strategy. Although there are signs of switching strategy effectiveness, especially during the bear markets, the results lack the statistical significance to conclude that it is superior to the buy-and-hold strategy.