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The Halloween effect: Trick or treat?

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  • Haggard, K. Stephen
  • Witte, H. Douglas

Abstract

Research documents higher stock returns in November through April than for the rest of the year. This anomaly is known as the "Halloween effect" and results in the following trading rule: sell stocks in early May, invest in T-bills, and re-invest in stocks on Halloween. In contrast to recent studies, we show that the Halloween effect is robust to consideration of outliers and the "January effect." Additionally, we show that investing in a "Halloween portfolio" provides risk-adjusted returns in excess of buy and hold equity returns even after consideration of transaction costs.

Suggested Citation

  • Haggard, K. Stephen & Witte, H. Douglas, 2010. "The Halloween effect: Trick or treat?," International Review of Financial Analysis, Elsevier, vol. 19(5), pages 379-387, December.
    • Handle: RePEc:eee:finana:v:19:y:2010:i:5:p:379-387
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    Cited by:

    1. Monika Krawiec & Anna Górska, 2021. "Are soft commodities markets affected by the Halloween effect?," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 67(12), pages 491-499.
    2. Urquhart, Andrew & McGroarty, Frank, 2014. "Calendar effects, market conditions and the Adaptive Market Hypothesis: Evidence from long-run U.S. data," International Review of Financial Analysis, Elsevier, vol. 35(C), pages 154-166.
    3. Plastun, Alex & Sibande, Xolani & Gupta, Rangan & Wohar, Mark E., 2020. "Halloween Effect in developed stock markets: A historical perspective," International Economics, Elsevier, vol. 161(C), pages 130-138.
    4. Satria Bagus Wicaksana & Nadia Asandimitra, 2018. "Halloween Effect in Indonesia Stock Exchange," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 8(3), pages 118-127, July.
    5. Degenhardt, Thomas & Auer, Benjamin R., 2018. "The “Sell in May” effect: A review and new empirical evidence," The North American Journal of Economics and Finance, Elsevier, vol. 43(C), pages 169-205.
    6. Matteo Rossi & Gabriella Marcarelli & Antonella Ferraro & Antonio Lucadamo, 2020. "How do Calendar Anomalies Affect an Investment Choice? A Proposal of an Analytic Hierarchy Process Model," International Journal of Economics and Financial Issues, Econjournals, vol. 10(1), pages 244-249.
    7. Lobão, Júlio, 2019. "Seasonal anomalies in the market for American depository receipts," Journal of Economics, Finance and Administrative Science, Universidad ESAN, vol. 24(48), pages 241-265.
    8. Tomasz Schabek & Henrique Castro, 2017. "“Sell not only in May”. Seasonal Effects on Stock Markets," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 17, pages 5-18.
    9. Peter Arendas & Viera Malacka & Maria Schwarzova, 2018. "A Closer Look at the Halloween Effect: The Case of the Dow Jones Industrial Average," IJFS, MDPI, vol. 6(2), pages 1-12, April.
    10. Gebka, Bartosz & Hudson, Robert S. & Atanasova, Christina V., 2015. "The benefits of combining seasonal anomalies and technical trading rules," Finance Research Letters, Elsevier, vol. 14(C), pages 36-44.
    11. Dragos Stefan Oprea, 2014. "The Halloween Effect Evidence from Romania," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(7), pages 463-471, July.
    12. Laurens Swinkels & Pim van Vliet, 2012. "An anatomy of calendar effects," Journal of Asset Management, Palgrave Macmillan, vol. 13(4), pages 271-286, August.
    13. Benjamin R. Auer, 2019. "Does the strength of capital market anomalies exhibit seasonal patterns?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(1), pages 91-103, January.
    14. Júlio Lobão & Ana C. Costa, 2023. "The Adaptive Dynamics of the Halloween Effect: Evidence from a 120-Year Sample from a Small European Market," IJFS, MDPI, vol. 11(1), pages 1-11, January.
    15. Zaremba, Adam & Schabek, Tomasz, 2017. "Seasonality in government bond returns and factor premia," Research in International Business and Finance, Elsevier, vol. 41(C), pages 292-302.
    16. Strobel, Marcus & Auer, Benjamin R., 2018. "Does the predictive power of variable moving average rules vanish over time and can we explain such tendencies?," International Review of Economics & Finance, Elsevier, vol. 53(C), pages 168-184.
    17. Lang, Korbinian & Auer, Benjamin R., 2020. "The economic and financial properties of crude oil: A review," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).
    18. Zhang, Cherry Y. & Jacobsen, Ben, 2021. "The Halloween indicator, “Sell in May and Go Away”: Everywhere and all the time," Journal of International Money and Finance, Elsevier, vol. 110(C).

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