Halloween may be gone, but the Halloween Effect is probably about to take shape. The effect is basically a historically observed uptick in stock prices from the month of November through the end of April. It is exactly opposite to the popular adage "sell in May and then walk away” which refers to the six months between May 1 and October 31. It is a seasonal anomaly which is dissimilar to the buy-and-hold strategy, in which an investor has to go through down months.
According to Forbes, a study conducted by Ben Jacobsen and Cherry Y. Zhang of Massey University in New Zealand shows that over a 319-year period, stocks habitually traded 4.52% better in the November through April period than in the summer months. Over the past 50 years, the disparity in performance was more glaring at 6.25%. This trend holds true in 35 countries.
Holiday season buying and seasonal optimism may play a huge role in this surge. Some analysts even believe that a harsh winter keeps people inside with nothing left than analyzing stock trends.
Though the trend held well till the start of the global market crisis, but it started to lose afterward as global economic events, geopolitical risks, central banks and their diverging monetary policies actually started overpowering seasonality. Still, investors believing in seasonality, may take a...