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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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Bounceback Portfolio

There is a theory that stocks that have fallen greatly in a year tend to bounce back in the first three months of the following year.

Is this true?

To analyse this, the ten worst performing stocks in the FTSE 350 in a year were put into an equally-weighted portfolio, the performance of which is measured for January-March of the following year.

The chart below shows the results for the years from 2003 to 2014: the charts plot the Bounceback Portfolio and FTSE 350 returns for the period January-March each year.

We can observe:

  1. The Bounceback Portfolio has outperformed the FTSE350 every year since 2003, except in 2013 ...

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