Seasonality

In recent times, we have observed heightened volatility across financial markets. Concerns surrounding government shutdowns, as well as the uncertainty they create, do little to calm these fluctuations. Rather than being purely disruptive, however, such events raise an intriguing question: could these episodes of political and economic uncertainty actually be leveraged to our advantage in investment strategies? In this article, we will examine several asset classes and attempt to assess whether this phenomenon provides a sufficiently relevant signal for investment decisions.

Cryptocurrency markets have matured into a distinct asset class characterized by extreme volatility, deep liquidity pools, and worldwide retail participation. Traditional equity and commodity markets exhibit a well-documented pre-holiday effect, where returns on trading days immediately preceding public holidays tend to outperform other days. Given that Bitcoin is often described as the archetypal absolute risk asset, it is natural to hypothesize that any calendar-driven anomalies observed in equities should manifest—or even amplify—in crypto markets.

However, unlike equity markets, where institutional investors and marketing calendars drive collective behavior, crypto markets are more dispersed, retail-dominated, and influenced by nontraditional information flows. This article investigates whether the classic pre-holiday effect applies to Bitcoin and assesses the extent to which it can be amplified by an attention-grabbing momentum filter based on local price highs.

Financial markets exhibit persistent calendar anomalies, which often defy the efficient‐market hypothesis by generating predictable return patterns tied to institutional or cultural events. In this paper, we document a novel, globally pervasive drift in gold prices surrounding major wealth-oriented festivals across the four principal cultural and religious domains: Christianity, Islam, Hinduism, and East Asian syncretic traditions. While each community endows its principal holidays with gift‐giving rituals and conspicuous displays of wealth, the sole differentiator among regions is the precise timing of these festivities on the Gregorian calendar.

Our central thesis is that gold, owing to its dual role as a universal wealth reservoir and socio-cultural status symbol, experiences concentrated, holiday-induced buying pressure that yields persistent and economically material drift in the GLD ETF. By quantifying this effect across four distinct cultural calendars, we introduce a previously undocumented demand-side factor into commodity-pricing models.

As the world’s attention shifts from the US-centric equity markets to international equity markets (which strongly outperform on the YTD basis), we could review some interesting anomalies and patterns that exist outside of the United States. In the world of monetary policy, traders have long observed a notable positive drift in U.S. equities on days surrounding Federal Reserve (FOMC) meetings. Interestingly, a similar—but slightly shifted—pattern emerges in European markets around European Central Bank (ECB) press conferences. Our quantitative analysis reveals that European equity markets tend to exhibit a strong and consistent upward drift on the day before the ECB’s scheduled press conference. The reason for this timing difference lies in logistics: since the ECB typically speaks at 14:15 CET (8:15 a.m. EST), well before the major U.S. markets open, investors often front-run the potential market-friendly signals from the central bank. Rather than risk holding positions into the uncertainty of the announcement itself, market participants gradually build up exposure the day before, pricing in expectations of dovish or supportive policy moves.

Understanding seasonality in financial markets requires recognizing how predictable return patterns can be influenced by investor behavior. One underexplored aspect of this is the impact of front-running—where traders anticipate seasonal trends and act early, shifting returns forward in time. We have already explored seasonality front-running in commodities, stock sectors, and crisis hedge portfolios. Our new research examines whether this phenomenon extends to country ETFs, an asset class where seasonality has been less studied. By applying a front-running strategy to a dataset of country ETFs, we identify opportunities to capitalize on seasonal effects before they fully materialize. Our findings indicate that pre-seasonality drift is strongest in commodities but remains present in country ETFs, offering a potential edge in portfolio construction. Ultimately, our study highlights how front-running seasonality can enhance ETF investing, providing an additional layer of market timing beyond traditional trend-following approaches.

Can we truly rely on the opening price in OHLC data for backtesting? While the overnight drift effect is well-documented in equities, we investigated its presence in gold using the GLD ETF and then extended our analysis to the GDX – Gold Miners ETF, where we observed an unusually strong overnight return exceeding 30% annualized. However, when we tested execution at 9:31 AM using 1-minute data, the anomaly diminished significantly, suggesting that the extreme return was partially a data artifact. This finding highlights the risks of blindly trusting OHLC open prices and underscores the need for higher-frequency data to validate execution assumptions.