The Halloween Effect in U.S. Sectors

Abstract

U.S. stock market sectors and industries perform better during winter than summer from 1926 to 2006. In more than two-thirds of sectors and industries, the difference in summer and winter returns, known as the Halloween effect, is statistically significant. There are, however, large differences across sectors and industries. The effect is almost absent in sectors related to consumer consumption but is strong in production sectors. We find that neither liquidity changes nor well-known risk factors can explain the anomaly. We illustrate how the differences between sectors and industries can improve the risk-return tradeoff using sector rotation. Copyright (c) 2009, The Eastern Finance Association.

The Halloween effect: Trick or treat?

“…However, the November-April period has a slightly smaller return standard deviation than the May-October period, adding to its attractiveness. Jacobsen and Visaltanachoti (2009) examine differences in the Halloween effect among U.S. stock market sectors and show that the effect is strongest for production sectors and weakest for defensive, consumer-oriented sectors. Maberly and Pierce (2004) examine monthly U.S. stock returns over the same 1970-1998 period as Bouman and Jacobsen.…”

Sell in May and Go Away: Still good advice for investors?

“…It is usually assumed that the first publication of an anomaly in the academic literature is of great relevance for the dissemination of research (Jacobsen & Visaltanachoti, 2009;Marquering, Nisser, & Valla, 2006;McLean & Pontiff, 2014;Schwert, 2003). Academic research draws attention to anomalies, and knowledge about an anomaly is more widespread after publication.…”

Seasonal Variation in the Vulnerability Discovery Process

“…For example, stocks tend to have relatively higher returns for some specific calendar months. The higher return during November to April is termed the Halloween Effect [8]. The authors of [2] have identified the repetitive pattern in [9] with lags of 12, 24, and 36 months.…”