The Halloween effect: Trick or treat?
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.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David H. Cutler & James M. Poterba & Lawrence H. Summers, 1988.
"What Moves Stock Prices?,"
487, Massachusetts Institute of Technology (MIT), Department of Economics.
- Sauer, Raymond D, et al, 1988. "Hold Your Bets: Another Look at the Efficiency of the Gambling Market for National Football League Games: Comment," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 206-13, February.
- Andrews, Donald W K, 1991.
"Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation,"
Econometric Society, vol. 59(3), pages 817-58, May.
- Donald W.K. Andrews, 1988. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Cowles Foundation Discussion Papers 877R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1989.
- Oliver Ledoit & Michael Wolf, 2008.
"Robust Performance Hypothesis Testing with the Sharpe Ratio,"
IEW - Working Papers
320, Institute for Empirical Research in Economics - University of Zurich.
- Ledoit, Oliver & Wolf, Michael, 2008. "Robust performance hypothesis testing with the Sharpe ratio," Journal of Empirical Finance, Elsevier, vol. 15(5), pages 850-859, December.
- Sven Bouman & Ben Jacobsen, 2002. "The Halloween Indicator, "Sell in May and Go Away": Another Puzzle," American Economic Review, American Economic Association, vol. 92(5), pages 1618-1635, December.
- Galai, Dan & Kedar-Levy, Haim & Schreiber, Ben Z., 2008. "Seasonality in outliers of daily stock returns: A tail that wags the dog?," International Review of Financial Analysis, Elsevier, vol. 17(5), pages 784-792, December.
- Keim, Donald B., 1983. "Size-related anomalies and stock return seasonality : Further empirical evidence," Journal of Financial Economics, Elsevier, vol. 12(1), pages 13-32, June.
- Rozeff, Michael S. & Kinney, William Jr., 1976. "Capital market seasonality: The case of stock returns," Journal of Financial Economics, Elsevier, vol. 3(4), pages 379-402, October.
- William Goetzmann & Jonathan Ingersoll & Matthew Spiegel & Ivo Welch, 2002.
"Portfolio Performance Manipulation and Manipulation-Proof Performance Measures,"
Yale School of Management Working Papers
amz2471, Yale School of Management, revised 01 Apr 2006.
- Jonathan Ingersoll & Ivo Welch, 2007. "Portfolio Performance Manipulation and Manipulation-proof Performance Measures," Review of Financial Studies, Society for Financial Studies, vol. 20(5), pages 1503-1546, 2007 17.
- Jobson, J D & Korkie, Bob M, 1981. "Performance Hypothesis Testing with the Sharpe and Treynor Measures," Journal of Finance, American Finance Association, vol. 36(4), pages 889-908, September.
- Sidney B. Wachtel, 1942. "Certain Observations on Seasonal Movements in Stock Prices," The Journal of Business, University of Chicago Press, vol. 15, pages 184.
- Lucey, Brian M & Zhao, Shelly, 2008. "Halloween or January? Yet another puzzle," International Review of Financial Analysis, Elsevier, vol. 17(5), pages 1055-1069, December.
- Edwin Maberly & Raylene Pierce, 2003. "The Halloween Effect and Japanese Equity Prices: Myth or Exploitable Anomaly," Asia-Pacific Financial Markets, Springer, vol. 10(4), pages 319-334, December.
- Ben Jacobsen & Nuttawat Visaltanachoti, 2009. "The Halloween Effect in U.S. Sectors," The Financial Review, Eastern Finance Association, vol. 44(3), pages 437-459, 08.
When requesting a correction, please mention this item's handle: RePEc:eee:finana:v:19:y:2010:i:5:p:379-387. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.