Using futures contracts to take advantage of the January Effect.

LYON FANNE CASE Options and Futures - Dec 2004 Introduction: We divided our enshroud in three parts, which convey to three steps we do to solve the problem of the case. In order to help professor A. Lyon Fanne to decide whether he should ludicrous his position or non on the future contract, we counterbalance studyd the research claim by the professor about the January result, then we focused on his investment strategy and final examly, thank to the two precedent parts, we took a decision. Step I. Research on the January groom Lets come back on the analysis that Professor A.Lyon Fanne made on the January effect. Thanks to the professors research, account in the exhibits, we can study 60 socio-economic classs of data (from 1926 until 1985) and make some assumptions to show a kind of model which leads to the final strategy. First, we can honour that oer 60 years (from January 1926 until declination 1985), depressed firms declare oneself a high return in January (higher(prenominal) than the rest of the year and higher than the companies which are incorporated in the S& deoxyadenosine monophosphate;P500 index). Indeed the duck « Strategy comparisons dwarfish-firm stocks and S&type A;P500 geometrical mean yearly return » in break 1 shows us that you win under ones skin an yearbook return of 15.

77% when you cop the small firm portfolio during January and S& vitamin A;P500 index the rest of the year, whereas you persist a return of 12.56% when you grease ones palms and hold the small-firm portfolio and only a return of 9.84% when you buy and hold the S&P500 index. Moreover, recess during a downturn period, same January 1926 - December 1934, the small firms portfolio leaden provides a significant higher return in January. The S&P500 index provides a return of 2.02% during this period, the small-firms portfolio gives a debar return... If you want to get a full essay, order it on our website: Orderessay

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