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Frankline Oyolo, Misango

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Holiday Effect in Equity Markets: A Systematic Trading Strategy

Market-AnomaliesHoliday-EffectEquity-TradingCalendar-EffectsStatistical-Arbitrage

Abstract

This report presents a comprehensive analysis of the Holiday Effect trading strategy — a calendar-based momentum anomaly exploiting pre-event price drift in Amazon (AMZN) stock around major shopping holidays. Over 1998–2025, the strategy demonstrates a Sharpe ratio of 0.54 with a 75.8% win rate across 33 trades. The strategy capitalizes on investor sentiment and revenue anticipation preceding Black Friday and Prime Day events. We analyze both equity long and options overlay implementations, evaluate risk-adjusted performance metrics, and provide detailed implementation guidelines. Pre-holiday returns are statistically significant at the 1% level (t-stat 3.96, p=0.0002).

Introduction

Calendar anomalies represent potential market inefficiencies that persist despite widespread knowledge. The Holiday Effect strategy investigates a specific seasonal pattern: pre-holiday price appreciation in Amazon stock before major shopping events. Amazon represents an ideal vehicle given its ~40% U.S. e-commerce market share and its ability to move broader retail sentiment.

Algorithm — Holiday Effect Trading Strategy
Input: AMZN prices, SPY index, VIX, holiday calendar
Output: Trade signals, equity curve, options attribution
FOR each year from 1998 to 2025:
build event dates for Black Friday and Prime Day
entry_date = event_date - 10 trading days
exit_date = event_date - 1 trading day
IF SPY > MA200(SPY) AND VIX < 25:
BUY AMZN at entry_date open
SELL AMZN at exit_date open
IF options overlay is enabled:
sell OTM puts on entry_date
close or expire positions by exit_date
APPLY risk rules:
exit on stop-loss if AMZN falls by 8%
suspend strategy if rolling 3-year Sharpe < 0.2
RECORD entry, exit, return, hold time, and rolling performance metrics

Market filters (both must pass for entry):

Pre-Holiday Entry Window Optimization (Sharpe Ratio)

Subperiod Robustness — Sharpe Ratio

Equity Strategy (1998–2025):

| Metric | Value | |---|---| | Initial Capital | $1,000,000 | | Final Value | $2,872,486 | | Total Return | 187.25% | | Annualized Return | 3.85% | | Sharpe Ratio | 0.54 | | Maximum Drawdown | -14.26% | | Number of Trades | 33 | | Win Rate | 75.8% | | Avg Days per Trade | 9.3 | | SPY Benchmark Return | 1,044.52% |

Options Overlay (2012–2025):

| Metric | Value | |---|---| | Total Trades | 25 | | Win Rate | 92.0% | | Total Premium Collected | $7,917.64 | | Total P&L | $2,657.14 |

Subperiod robustness: 1998–2010 (discovery): Sharpe 0.61. 2011–2025 (validation): Sharpe 0.48. Modest decay consistent with gradual arbitrage of the anomaly. Window optimization confirms 10 days as optimal (Sharpe 0.54 vs 0.38 at 5 days, 0.42 at 15 days).

Filters eliminated 6 of 39 events (15.4%) due to bearish conditions or elevated volatility. Time in market: only 307 of 7,042 trading days (4.4%), explaining the underperformance vs buy-and-hold SPY in absolute terms while maintaining competitive Sharpe.

Contributions

  • Statistical confirmation of pre-holiday momentum in Amazon at the 1% significance level (t=3.96, p=0.0002) over 27 years
  • Quantitative window optimization demonstrating 10-day pre-event entry as optimal across 5/7/10/15-day alternatives
  • Put-selling overlay achieving 92% win rate by monetizing the pre-holiday upward drift through options premium collection
  • Subperiod validation (1998–2010 discovery vs 2011–2025 out-of-sample) confirming anomaly persistence with modest decay

Paper

Author

Frankline Misango Oyolo Quantitative Research Division, Arithmax Research Frankline@arithmax.com — Published: March 2, 2026