> Hi Richard --
>
> I think I misunderstood your question.
>
> The idea behind the system is that there may be a trading bias in
favor of
> or against the end of one calendar month and the start of the
next. The
> system can tested for each trading day of the month or calendar day
of the
> month that you are interested in. That is where the 22 and / or 31
would
> come in.
>
> For the system described in the book, only the First trading day is
tested.
>
>
> To test the effect, set the reference point to be the first trading
day of
> the month -- the day where this day's month is not the same as
yesterday's
> month. Then test the effect of buying each of the days around the
first
> trading day of the month by adding or subtracting some number of
days. That
> is where the optimize from -8 to plus 8 comes in. Each of those 17
runs
> tests the profitability of buying on that day, relative to the
reference
> day, and holding for one day. If there is a bias, it will show up
as some
> day, relative to the first trading day of the month, being
particularly
> profitable or not profitable. For the in-sample period, 1/1/1995 to
> 1/1/2005, there is a strong seasonality effect -- buy on the third
day
> before the first trading day of the month and hold through the
second day
> after. See Figure 11.7. For the out-of-sample period, 1/1/2005
through
> 1/1/2007, that same seasonality holds fairly well, but the days
after the
> first trading day are not as strong. See Figure 11.9.
>
> If you want to test any other reference day, you can by setting the
> reference day to one of the 31 calendar days or one of the 22
trading days
> of the month.
>
> In this case, I did not wrap completely around because I was
testing the
> effect around the First trading day.
>
> Look at pages 155-158 and you will see a similar technique applied
to
> testing the profitability of trading around options expiration.
>
> Thanks,
> Howard
>
www.quantitativetradingsystems.com
>
>