Friday, January 2, 2009

The New January Effect: How the First Trading Day of the Year Effects Stock Market Volatility

The chart above shows why I will day trade the stock market on every first day of the year: the intraday volatility increases. Intuitively, the graph represents the amount (in percentage) that the first day volatility increases over "normal," which is defined as the average daily intraday volatility over the previous year. The first trading day affords an average increase in volatility of 0.52%.

Usually one has to try very hard to estimate when and where volatility will strike. But when you have a good idea of the timing of large price spikes your life becomes a whole lot easier.
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2 comments:

guston said...

Good interpretation of data. Information provided is of use. Thanks for the post.
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Susan said...

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Susan

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