Calendar effects on the stock market

Calendar effect  A calendar effect is any market anomaly or economic effect which appears to be related to the calendar. Such effects include the apparently different behavior of stock markets on different days of the week, different times of the month, and different times of year (seasonal tendencies). Examples include:  Sell in May principle (or Halloween indicator)  January effect  January barometer  Mark Twain effect  Monday effect  Weekend effect  Turn-of-the-Month effect

Sell in May  Sell in May and go away is an investment strategy for stocks based on a theory (sometimes known as the Halloween indicator) that the period from November to April inclusive has significantly stronger growth on average than the other months.  For example, Spanish bond yields have recently risen, French president Nicolas Sarkozy is in a closely contested run-off, the Dutch coalition government has collapsed and Britain’s economy is contracting.

Cause of the effect of Sell in May  Stock market returns should not be predictably lower than the short- term interest rate (risk free rate).  Popular media often refer to this market wisdom in the month of May, claiming that in the six months to come things will be different and the pattern will not show.

January effect  The January effect is a hypothesis that there is a seasonal anomaly in the financial market where securities' prices increase in the month of January more than in any other month.  The effect was first observed around 1942 by investment banker Sidney B. Wachtel. He noted that since 1925, small stocks had outperformed the broader market in the month of January, with most of the disparity occurring before the middle of the month.  Since the January effect provides a one-year forecast, trades based on the January effect should be implemented on bigger charts – daily or weekly.

Mark Twain effect  In some stock markets, the Mark Twain effect is the phenomenon of stock returns in October being lower than in other months.  While the seasonal have yet to fully play out in 2015, the persistence of the October recovery rally through all kinds of market environments is striking.  Although forecasts of another US recession are endemic, the hard data generally shows that the recovery is fragile but intact, from payrolls to purchasing manager surveys to retail sales.  Global central banks are easing policy, Europe is edging toward a solution of its sovereign debt crisis, at least for now, and there are even early whiffs of a policy shift in China.

References  1.Sven Bouman; Ben Jacobsen (2012). "The Halloween Indicator, "Sell in May and Go Away": Another Puzzle". American Economic Review  2.Maberly, Edwin D. and Pierce, Raylene M. "Stock Market Efficiency Withstands another Challenge: Solving the 'Sell in May/Buy after Halloween' Puzzle" (April 2014).  3.Jacobsen, Ben and Visaltanachoti, Nuttawat, The Halloween Effect in US Sectors (March 8, 2016).  4.Sidney B. Wachtel; Investment Banker". The Washington Post. October 3,  5.Keim, Donald B.: Size-Related Anomalies and Stock Return Seasonality: Further Empirical Evidence, Journal of Financial Economics 12 (1983)  6.  7.Siegel, Jeremy J.: Stocks for the Long Run (Irwin, 1994) pp. 267– 274  8.Ciccone, Stephen J. (January 18, 2015). "January’s Stock Temptation". The New York Times.