MackTheKnife's Blog : China and the Shape of Things to Come

H.G. Wells, one of my all-time favorite authors, may be best known nowadays for either The Time Machine or War of the Worlds, but we here at the home office of the completely fictional Druids Investment Group -- Can You DIG It? -- also appreciate The Shape of Things to Come. Among its attributes, this novel was one of the bases of the prescient H.G. Wells' Things to Come feature film released in 1936 (http://tinyurl.com/caqpgr).

I believe there may be a Wellsian aspect to my own approach to the equity market and its sectors, as I attempt to forecast their probable courses of action across multiple time frames. As mentioned here at P&P on a number of occasions, I commonly incorporate into these projections an awareness of cyclicality, periodicity, and seasonality, collectively known to the Big DIGgers as The Carousel Effect.

In this context, I recently conducted a historical statistical study of the Shanghai Stock Exchange (SSE) Composite Index (SSEC), employing data generated in the 10 years between 2000 and 2009, inclusive.

One of the aims of this study was to determine the effect -- or noneffect -- of China's Spring Festival on the SSEC during the trading days immediately after it. N.B.: In celebration of the festival this year, the exchange will be closed from tomorrow to Feb 21, inclusive.

Here are a few of the many findings of the study in this area:

Daily Change by Percentage in China's SSEC
X Number of Days Following the Spring Festival



Std Dev = Standard Deviation

Source: DIG Table Based on Yahoo! Finance Data

Based on seasonality alone, I therefore think this may not be the worst time of year to be a bull in the China shop . . .