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The Halloween effect: Trick or treat?

2010; Elsevier BV; Volume: 19; Issue: 5 Linguagem: Inglês

10.1016/j.irfa.2010.10.001

1873-8079

K. Stephen Haggard, H. Douglas Witte,

Financial Risk and Volatility Modeling

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.