The benefits of combining seasonal anomalies and technical trading rules

Although many seasonal anomalies and technical trading rules have been shown to have predictive ability, investigations have focused only on them operating individually. We study the benefits of trading based on combinations of three of the best known effects: the moving average rule, the turn of the month effect, and the Halloween effect. We show that the rules can be combined effectively, giving significant levels of returns predictability with low risk and offering the possibility of profitable trading. This new investment approach is especially beneficial for a typical individual investor, who faces high transaction costs and is poorly diversified.