The Halloween Indicator Buried at Cemetery in 2009

October 30, 2009 at 2:00 am Leave a comment

Scary

Boo!

Statisticians, economists, speculators, and superstitious investors have been known to get spooked by scary patterns. Tomorrow marks the end of the menacing six month period of supposed underperformance that starts in May and ends on Halloween. The so-called “Halloween Indicator” has popularized the expression of “sell in May and walk away.” The indicator obviously has not followed the alleged tendency in 2009, as there has been more “treat” than “trick” for investors over the last six months. The S&P has rallied about +22% (excluding dividends) with only one day left in the trading period. Numerous academics have studied the phenomenon and not surprisingly there is some debate regarding the validity of various studies (see past study) – differing opinions have risen to the surface, depending on the number of years compiled in the data.

Here is what Mark Hulbert at MarketWatch had to say on the subject:

“Over the Dow’s history up until the last 12 months, there were no fewer than 17 occasions (15% of the years) in which both the winter months turned in a net loss for the stock market and the summer months produced a gain. There furthermore were 45 years (41% of the time) in which the stock market during the summer period did better than it did over the winter months that immediately preceded it. So the stock market’s performance over the last 12 months is hardly exceptional. It would take a lot more than the recent seasonal missteps to convince a statistician that this long-term pattern has stopped working for good. “

Other calendar effects besides the Halloween Indicator include, the January Effect, Monday Effect, and Presidential Cycle. Even though some pundits point to evidence supporting calendar effects, in many cases the data is proved to be statistically insignificant.

With Halloween just around the corner, here’s Sidoxia Capital Management wishing you a larger bag of treats rather than tricks in your quest in following calendar effects.

Wall Street Halloween Costume Ideas:

Short of ideas for Halloween costumes this year? No need to fear. Here are a few bloodcurdling Wall Street costume ideas with the help of Joshua Brown at The Reformed Broker and our friends at Forbes:

Bernanke Mask

Top Ten Scariest Wall Street Halloween Costumes

 Forbes Halloween Masks

Halloween Index:

For those that would rather get there treats from the stock market rather than a candy bowl, perhaps you may find a sweet idea from Stockerblog’s Halloween Stock Index.

Have a happy and safe Halloween!

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

DISCLOSURE: Sidoxia Capital Management and client accounts do not have direct positions in any of the Halloween Stock Index companies with the exception of long positions in WMT for some Sidoxia accounts. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page

Entry filed under: Financial Markets, Trading. Tags: , , , , , , , , , .

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