Kensho Stats

How to trade the Bank of Japan stimulus

Businessmen walk past the Bank of Japan in Tokyo, Japan
Hitoshi Yamada | NurPhoto | Getty Images
Businessmen walk past the Bank of Japan in Tokyo, Japan

How can investors trade the Bank of Japan announcement on Friday of more stimulus measures?

Using Kensho, an analytics tool used by hedge funds, we looked at what happened to markets and stocks one month after the Japanese central bank made similar such announcements since 1992.

Here's what we found.

Historically, the biggest winners on the heels of such an event have been Korean, European and U.S. consumer-discretionary stocks.

Japan's central bank has expanded monetary policy 27 times since 1992, including twice this year, according to Kensho.

One month later, the country's benchmark Nikkei 225 index traded positive only about half the time. Bigger and more reliable returns have been found elsewhere. Korea's Kospi index has popped more than 4.5 percent on average, while the biggest European stocks have gained more than 3 percent.

In the U.S., the biggest winner has been the consumer-discretionary sector, which has traded positive about 80 percent of the time after BOJ stimulus announcements.

The best-performing names in the XLY consumer discretionary ETF have been Carnival, Gap, Nike, Macy's and Time Warner.

For investors in Japanese markets, it's maybe a case of "buying the rumor and selling the news" when stimulus packages don't meet expectations. In turn, that tends to strengthen the currency, the yen, which makes the country's exports less competitive and hurts equities.

Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.