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{{for|the Callendar effect theory linking carbon dioxide levels to global temperature|Guy Stewart Callendar}} |
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{{short description|Difference in the market or economy behavior related to calendar cycles}}{{More citations needed|date=February 2021}} |
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A '''calendar effect''' is any economic effect, particularly in markets, which appears to be related to the calendar. Such effects include the apparently different behaviour of stock markets on different days of the week, different times of the month, and different times of year ('''seasonal tendencies'''). The term sometimes includes multi-year effects, such as the 10-year (decadal) cycle, or the 4-year U.S. presidential election cycle. It also sometimes includes time of day effects. |
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A '''calendar effect''' (or '''calendar anomaly''') is any [[market anomaly]], different behaviour of stock markets, or economic effect which appears to be related to the calendar, such as the day of the week, time of the month, time of the year, time within the U.S. presidential cycle, decade within the century, etc...<ref>{{Cite web | url=https://www.fisherinvestments.com/en-us/marketminder/september-is-just-a-month | title=September Is Just a Month | date=September 2, 2013}}</ref> |
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* [[Halloween indicator]] (or the 'Sell in May' principle) |
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Some people believe that if they do exist, it is possible to use [[market timing]] to take advantage of the effect. Economists say that according to the [[efficient-market hypothesis]] such effects should not exist, as these anomalies should be already incorporated in the price. |
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==Causes== |
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| ⚫ | [[Market price]]s are often subject to seasonal tendencies because the availability and demand for an item is not constant throughout the year. For example, [[natural gas]] prices often rise in the winter because that [[commodity]] is in demand as a heating fuel. In the summer, when the demand for heat is lower, prices typically fall. |
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Notable calendar effects include: |
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* [[Sell in May]] principle (or Halloween indicator) |
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* [[January effect]] |
* [[January effect]] |
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* [[January barometer]] |
* [[January barometer]] |
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* [[Mark Twain effect]] |
* [[Mark Twain effect]] |
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* [[ |
* [[The Congressional Effect]] |
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* [[ |
* [[Santa Claus rally]] |
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* [[Super Bowl indicator]] |
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* [[Turn-of-the-Month effect]] |
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* [[ |
* [[Lunar effect]] |
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* [[United States presidential election cycle]] |
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* Weekend effect: Over the very long run, on average, weekend returns in US stock prices have tended to be negative. <ref>{{cite book |url=https://academic.oup.com/book/54648/chapter-abstract/422635057?redirectedFrom=fulltext |title=Beyond the Random Walk - The Weekend Effect |chapter=3 |year=2003 |last=Singal |first=Vijay }}</ref> |
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* Midweek effect: In the US, stock returns from between the Monday close and the Wednesday close have tended to grow at a near-constant rate since the 1880s. <ref>{{cite web|url=https://seekingalpha.com/article/4636170-strange-patterns-in-intraweek-returns-part-1 |title=Strange Patterns In Intraweek Returns - Part 1 |date=September 20, 2023 |publisher=Seeking Alpha}}</ref><ref>{{cite web |url=https://seekingalpha.com/article/4636175-strange-patterns-in-intraweek-returns-part-2 |title=Strange Patterns In Intraweek Returns - Part 2 |date=September 20, 2023 |publisher=Seeking Alpha}}</ref> |
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==Arguments that calendar effects do not exist or are not significant== |
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In their 2001 paper ''Dangers of data mining: The case of calendar effects in stock returns'' (''Journal of Econometrics''), Sullivan et al. argue that there is no statistically significant evidence for calendar effects in the [[stock market]], and that all such patterns are the result of [[data dredging]]. |
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In their 2001 paper ''Dangers of data mining: The case of calendar effects in stock returns'', Ryan Sullivan et al. argue that there is no [[statistically significant]] evidence for calendar effects in the [[stock market]], and that all such patterns are the result of [[data dredging]].<ref>{{Citation | title=Dangers of data mining: The case of calendar effects in stock returns | date=November 2001 | url=https://www.sciencedirect.com/science/article/pii/S030440760100077X | journal=[[Journal of Econometrics]]| doi=10.1016/S0304-4076(01)00077-X | last1=Sullivan | first1=Ryan | last2=Timmermann | first2=Allan | last3=White | first3=Halbert | volume=105 | pages=249–286 }}</ref> However there are contradictory findings and there is an ongoing debate on [[behavioral economics]] versus [[rational choice theory]]. |
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According to the [[efficient-market hypothesis]], the calendar anomalies should not exist because the existence of these anomalies should be already incorporated in the prices of securities.<ref>{{Citation | last=Schwert | first=G. William | title=Chapter 15 Anomalies and market efficiency | date=2003 | url=https://www.sciencedirect.com/science/article/pii/S1574010203010240 | work=Handbook of the Economics of Finance | pages=939–974 | publisher=Elsevier | isbn=9780444513632}}</ref> |
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| ⚫ | [[Market price]]s are often subject to seasonal tendencies because the availability and demand for an item is not constant throughout the year. |
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Calendar anomalies are significantly influenced by the financial trend, because the investors' psychology depends on the [[business cycle]], and their behavioral change influences not only the market's performance but also the calendar anomalies (Vasileiou (2015)).<ref>{{Cite journal | last=Vasileiou | first=Evangelos | date=2015 | title=Long Live Day of the Week Patterns and the Financial Trends' Role. Evidence from the Greek Stock Market during the Euro Era (2002-12) | journal=Investment Management and Financial Innovations |volume=12 |issue=3 |doi=10.2139/ssrn.2338430 | issn=1556-5068| ssrn=2338430 | s2cid=154992237 }}</ref> |
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Moreover, some calendar anomalies seem to fade if we do not revise them. E.g. if examine the Turn of the Month effect using the dominant (-1,+3) definition as proposed by Lakonishok and Smidt(1988), this effect weakens, unless we revise the window period/definition (Vasileiou (2018)).<ref>{{Cite journal | last=Vasileiou | first=Evangelos | date=2018 | title=Is the turn of the month effect an "abnormal normality"? Controversial findings, new patterns and…hidden signs(?) | journal=Research in International Business and Finance | volume=44 | pages=153–175 |doi=10.1016/j.ribaf.2017.07.057 | s2cid=157633009 | issn=0275-5319}}</ref> |
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* [[Eternal September]] |
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* [[Grand supercycle]] |
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* [[July effect]] |
* [[July effect]] |
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* [[ |
* [[Kondratiev wave]] |
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* [[ |
* [[Lunar effect]] |
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==References== |
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{{Reflist}} |
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{{Economics}} |
{{Economics}} |
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{{DEFAULTSORT:Calendar Effect}} |
{{DEFAULTSORT:Calendar Effect}} |
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[[Category:Market trends]] |
[[Category:Market trends]] |
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[[Category:Behavioral finance]] |
[[Category:Behavioral finance]] |
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[[sv:Kalendereffekter]] |
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Latest revision as of 10:09, 1 August 2024
 | This article needs additional citations for verification. (February 2021) |
A calendar effect (or calendar anomaly) is any market anomaly, different behaviour of stock markets, or economic effect which appears to be related to the calendar, such as the day of the week, time of the month, time of the year, time within the U.S. presidential cycle, decade within the century, etc...[1]
Some people believe that if they do exist, it is possible to use market timing to take advantage of the effect. Economists say that according to the efficient-market hypothesis such effects should not exist, as these anomalies should be already incorporated in the price.
Seasonal patterns are not confined to prices; many other systems can exhibit the same kind of calendar effect. However, the term is most often used in an economic context.
Causes
[edit]Market prices are often subject to seasonal tendencies because the availability and demand for an item is not constant throughout the year. For example, natural gas prices often rise in the winter because that commodity is in demand as a heating fuel. In the summer, when the demand for heat is lower, prices typically fall.
Examples
[edit]Notable calendar effects include:
- Sell in May principle (or Halloween indicator)
- January effect
- January barometer
- Mark Twain effect
- The Congressional Effect
- Santa Claus rally
- Super Bowl indicator
- Lunar effect
- United States presidential election cycle
- Weekend effect: Over the very long run, on average, weekend returns in US stock prices have tended to be negative. [2]
- Midweek effect: In the US, stock returns from between the Monday close and the Wednesday close have tended to grow at a near-constant rate since the 1880s. [3][4]
Arguments that calendar effects do not exist or are not significant
[edit]In their 2001 paper Dangers of data mining: The case of calendar effects in stock returns, Ryan Sullivan et al. argue that there is no statistically significant evidence for calendar effects in the stock market, and that all such patterns are the result of data dredging.[5] However there are contradictory findings and there is an ongoing debate on behavioral economics versus rational choice theory.
According to the efficient-market hypothesis, the calendar anomalies should not exist because the existence of these anomalies should be already incorporated in the prices of securities.[6]
Calendar anomalies are significantly influenced by the financial trend, because the investors' psychology depends on the business cycle, and their behavioral change influences not only the market's performance but also the calendar anomalies (Vasileiou (2015)).[7]
Moreover, some calendar anomalies seem to fade if we do not revise them. E.g. if examine the Turn of the Month effect using the dominant (-1,+3) definition as proposed by Lakonishok and Smidt(1988), this effect weakens, unless we revise the window period/definition (Vasileiou (2018)).[8]
See also
[edit]References
[edit]- ^ "September Is Just a Month". September 2, 2013.
- ^ Singal, Vijay (2003). "3". Beyond the Random Walk - The Weekend Effect.
- ^ "Strange Patterns In Intraweek Returns - Part 1". Seeking Alpha. September 20, 2023.
- ^ "Strange Patterns In Intraweek Returns - Part 2". Seeking Alpha. September 20, 2023.
- ^ Sullivan, Ryan; Timmermann, Allan; White, Halbert (November 2001), "Dangers of data mining: The case of calendar effects in stock returns", Journal of Econometrics, 105: 249–286, doi:10.1016/S0304-4076(01)00077-X
- ^ Schwert, G. William (2003), "Chapter 15 Anomalies and market efficiency", Handbook of the Economics of Finance, Elsevier, pp. 939–974, ISBN 9780444513632
- ^ Vasileiou, Evangelos (2015). "Long Live Day of the Week Patterns and the Financial Trends' Role. Evidence from the Greek Stock Market during the Euro Era (2002-12)". Investment Management and Financial Innovations. 12 (3). doi:10.2139/ssrn.2338430. ISSN 1556-5068. S2CID 154992237. SSRN 2338430.
- ^ Vasileiou, Evangelos (2018). "Is the turn of the month effect an "abnormal normality"? Controversial findings, new patterns and…hidden signs(?)". Research in International Business and Finance. 44: 153–175. doi:10.1016/j.ribaf.2017.07.057. ISSN 0275-5319. S2CID 157633009.