Santa Claus Rally chart

Lot’s of rumors are told about Santa Claus Rally. Significantly less exact charts can be seen about it, though a good chart could make clear a lot of things.

What does a Santa Claus Rally chart have to be like?

Having read a lot of articles about Santa Claus Rally I realized that people do not really agree on when it begins and when it ends. Somebody says it is just the beginning of the January effect, others tell it may begin in November or it is just the couple days at the end of the year.

Either way, investment performance in December is very important from the aspect of Santa Claus Rally. The statistics of December can be seen on the chart below. (December is highlighted with the red frame.)

Santa Claus Rally chart example: a stock that performs well during Santa Claus Rally

How often did Santa Claus Rally cause price increase?

The first important value on the chart is “Frequency of increase“. It tells how many times the investment yielded positive return between the beginning and the end of a month.
For example: if a stock’s return was positive 9 out of 10 times, then “Frequency of increase” equals 90%. (In the example above: 7 times out of 8 = 87.5% ~= 88%)

What else is required on the chart?

Think about a stock whose price rises 0.1% every December. “Frequency of increase” would be 100% for it yet you cannot make any money on it because you also have to pay the transactional fees that are making your return negative.
So the other important number to consider is the “Average return” in December.

Such charts can be made easily by using the free software Chartoasis Sesame.