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Halloween Is A Great Time To Invest In Stocks

Talk about trick or treat: Halloween, one of the spookiest days of the year, might also be one of the best times to invest your money in the stock market.

Truth is, no one actually knows why, but investing in stocks on All Hallows Eve – October 31 – can earn you superior long-term returns in the stock market, according to two finance professors who conducted extensive research. They came to their surprising conclusion after studying more than 300 years of stock market data from over 100 stock markets worldwide (the oldest stock market dates back to 1602 in Amsterdam, Netherlands). Their conclusion? A “Halloween effect” impacted almost every market, especially those most actively traded and liquid markets in the U.S., as well as developed markets overseas.


What Does The “Halloween Effect” Mean For The Market?

“Overall, the 62,962 monthly observations over 323 years indicate a strong Halloween effect,” writes Cherry Yi Zhang, assistant professor in finance at Nottingham University’s Business School in China, and Ben Jacobsen, professor of finance at the TIAS School of Business and Society in the Netherlands.

Their financial analysis, which looked at 65 developed and emerging markets, found that stock market returns for the six months following Halloween averaged 8.5% annually. The returns for the other six months of the year (May to October) averaged just 2.1%. Just as surprising:  Obscure and illiquid markets yielded returns of 6.6% for the six months following Halloween, and just 1.7% for the other half of the year.


An Interesting Phenomenon, Witch-ever Way You Look At It

The study authors found that the mysterious Halloween effect has been occurring since the days of the Salem witch trials. Jacobsen and Zhang looked at stock market data going all the way back to the 1690s in London. Their analysis showed that during that time period, an investor who only purchased stock at Halloween each year – and sold six months later – realized major returns. During any 10-year period, the data indicated that Halloween investors had a 90% chance of beating buy-and-hold investors, and seeing significantly higher returns.


Is It Actually A Good Time To Invest?

If you run data going back to the 1890s, the Dow Jones Industrial Average declined in the six months after Halloween on 38 occasions, which is nearly one year in three. In addition, it declined by more than 5% on 23 occasions, roughly one time in five. But according to Zhang and Jacobsen’s data, the Halloween effect appears to have worked globally over time.

It goes without saying, however, that the past is no guarantee for the future. But snagging a high return on your stock market investment sure would beat bagging some leftover Halloween candy any day of the week.