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The UK Stock Market Almanac 2016: Seasonality analysis and studies of market anomalies to give you an edge in the year ahead by Stephen Eckett

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Oil

The following chart shows the monthly seasonality of the oil price (West Texas Intermediate) since 1986.

As can be seen, the oil price has historically had relatively strong returns in the months of March and April, and weak returns in October and November. The recent behaviour, since year 2000, has seen a similar trend.

Oil and the stock market

What is the connection between the oil price and the stock market?

The next chart plots the monthly returns of oil and the FTSE All-Share index. As can be seen, there is very little correlation (R2 = 0.001).

The following chart shows the ratio of the FTSE All-Share index to oil since 1971. (One ...

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