Introduction

Pre-holiday days on the market are often characterized with lower liquidity as a lot of market participants are not involved in the market or they lower their exposure. Historical research shows that stock prices often behave in a specific manner in each of the two trading days preceding these holidays. This anomaly in Equities is often called the pre-holiday effect. It is the market in-efficiency for short-term traders to gain on the final trading day before a holiday. In this algorithm, we'll construct a simple strategy to exploit this pre-holiday effect in the Equity market.

Method

The TradingCalendar class can help us find all the available holidays during a period of time. GetDaysByType returns trading days of the specified TradingDayType that contains trading events associated with the range of dates. Here we choose the type to be TradingDayType.PublicHoliday and list all holidays from today to the next two days. As PublicHoliday includes weekends, we use the type TradingDayType.Weekend to subtract weekend holidays.

def OnData(self, data):
    calendar1 = self.TradingCalendar.GetDaysByType(TradingDayType.PublicHoliday, self.Time, self.Time+timedelta(days=2))
    calendar2 = self.TradingCalendar.GetDaysByType(TradingDayType.Weekend, self.Time, self.Time+timedelta(days=2))
    holidays = [i.Date for i in calendar1]
    weekends = [i.Date for i in calendar2]
    public_holidays = list(set(holidays) - set(weekends))

The investment vehicle is SPDR S&P500 ETF. The algorithm will trade the ETF if there are holidays within the next two days and stays in cash during other trading days.

if not self.Portfolio.Invested and len(holidays)>0:
    self.SetHoldings("SPY", 1)
elif self.Portfolio.Invested and len(holidays)==0:
    self.Liquidate()

Reference

  1. Quantpedia - Pre-Holiday Effect