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Holiday Effect Trading Strategy: A Calendar-Based Momentum Anomaly in Amazon Stock

Author:Frankline Misango Oyolo
Date:2025
Institution:Arithmax Research
Calendar Anomaly Momentum Event Trading Equity Strategy

Summary

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 the period 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.

Key Results

  • Sharpe ratio of 0.54 over 27-year period (1998-2025)
  • 75.8% win rate across 33 holiday trades
  • Statistically significant pre-holiday momentum effect
  • Optimal entry: 14-21 days before major shopping events

Key Mathematical Framework

Pre-Holiday Return:

$$R_{\text{pre}} = \frac{P_{\text{event}} - P_{\text{entry}}}{P_{\text{entry}}}$$
where entry is \(T\) days before event
Sharpe Ratio:

$$SR = \frac{\mu_{\text{strategy}} - r_f}{\sigma_{\text{strategy}}}$$
Observed: \(SR = 0.54\)
Win Rate:

$$WR = \frac{N_{\text{profitable trades}}}{N_{\text{total trades}}}$$
Observed: \(WR = 75.8\%\) (25/33 trades)

Trading Algorithm

Holiday Effect Strategy
  • Identify major shopping holidays (Black Friday, Prime Day)
  • Enter long position 14-21 days before event
  • Size position based on historical volatility
  • Monitor pre-event price momentum
  • Exit 1-2 days before event (avoid post-event reversal)
  • Apply stop-loss at -5% to limit downside
  • Track win rate and adjust entry timing if needed

Full Paper

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