Stocks Welcome New Year With Higher Returns  

We analyzed the returns of ISE-100 index and it appears that the stock exchange waits for the New Year with hopes just as people do. According to our research, the highest return at ISE-100 is in December and the lowest in May.

 It is not always easy to decide which stock to invest in and when to invest. There are many factors to consider; news about companies, important topics on the country’s agenda, developments at global level, indicators of major economies, psychological factors and so on. It is possible to include into the list other factors that have effects on stock exchanges. Although there is no magic formula about choosing the right stock at the right time, returns increase in some periods and decrease in other periods.  Returns may vary in the hours before and after the announcement of significant data, at weekends or at the beginning of week while there may also be variations on monthly basis. While returns increase in some months, it is seen that losses considerably grow in some other months. According to our research on returns covering 1995 and June 2008, this variation is clearly seen. Our study in which returns and losses in ISE-100, ISE Industrial Index, ISE Financial Index and dollar against Turkish Lira were analyzed, December emerged with 12.42% as the month with the highest returns at ISE-100. October followed December with 10.81%.

 Buy in October Sell in May

May is measured as the month with lowest returns, while April ranks third in the list of returns after October with 10.15%. The other months in the top five are January and February. Another interesting point is that results named as January Effect in the literature and pointing out to higher returns in that month are not equally valid for the ISE. December’s appearing as the month with the highest returns can be interpreted that investors who want to benefit from January Effect begin to buy earlier and carry that effect into December. The 12-month average return at the ISE is 4.24%.

The months remaining below the average are ranked as; November, July, September, March, June, August and May. The number of months with above-average return is 5. That is to say, returns are below average in the majority of months. Another result from the study is that returns considerably fall in summer months. Remaining low also in September, returns enter an upward trend in October. The analysis shows that returns may be quite high if investors buy and sell at the right time. For example; if stocks are bought at early October and sold at late April, the compound returns reach 64.16%. If stocks are sold at the end of January, this rate becomes 39.35%. The compound return of stocks that are bought in early May and sold in late August decreases to 14.12%. In this situation, it seems to be the most rational decision to invest in October and leave the stock exchange before entering May. 

Financial and Industrial Indexes

 When an analysis is done based on financial and industrial indexes; as it is at the ISE-100, the month with the highest return is December. May is the month when losses are at the highest. So, the months with the highest losses and returns are the same in all three indexes of the ISE. While there are not great differences between the ISE-100 and the Financial Index, it is seen that returns on the Industrial Index differ from the rest. For the Financial Index, the month with the second highest returns is October and for the Industrial Index, April. It appears that the second month with the highest losses is August for all three indexes. When the average of indexes is looked at, the highest return is at the Financial Index. The Financial Index is followed by the ISE-100 and the Industrial Index in order. The months with above-average returns for the Financial Index are as follows in order; December, October, April, January, February and November. The order for the Industrial Index is as follows; December, April, January, October and July. Returns remained below average in March when stock exchanges suffered falls worldwide.

It is observed that returns on the Industrial Index remained higher in March. Return on dollar is at its highest in February, and at its lowest in January. While returns on dollar are at the lowest in the first three months of the year, it reaches the highest level rising in the second and third months. Another point to bring is that dollar returns fall in the months stock exchange returns rise. However, in September dollar and stock exchange returns remain at nearly similar levels. Investors who have to make their decisions after thinking much should carefully choose the company stocks of which they are to buy. Besides that, timing is also quite important. Taking steps while keeping in mind temporary reactions at the stock exchange appears as a critical detail with respect to being a “conscious investor.”