Behavioral finance FAQ / Glossary (Calendar)
This is a separate page of the C section of the Glossary
Dates of related message(s) in the
Behavioral-Finance group (*):
Year/month, d: developed / discussed,
00/11d - 01/4i,10i -
05/12d + see seasonal
effect, time horizon
Happy stock return to you for your birthday?
In asset markets, and notably stock markets, statisticians
spotted "calendar effects", "seasonal
effects", "Monday effect", "periodic effects" , as
periodic and temporary return anomalies.
Those backward / forward tango steps occur in specific
times of the day, the week, the year...
Those abnormal stock price moves (rises or falls) seem to repeat
themselves cyclically once a week, once a year, etc.
(and more irregularly in the case of weather effects).
They bring temporary distortions in returns and prices, compared to
* the general trend,
* standard probability laws
* or fundamental values.
ExamplesOpen the almanach!
There are controversies about the existence of such effects,
but those usually cited are:
Autumn effect, January effect, turn of the month effect.
Weekly effect, week-end effect, Monday effect (*),
back to work effect, morning effect, etc.
(*) It seems that you can find better bargains on Mondays,
whan investors are a bit depressed, than on Fridays
when they joyously anticipate the week-end,
Full moon vs. new moon (hmm, market werewolves around ?)
Weather bias / effect sunny days vs. rainy days... .
Well, they are less regularly periodic than pure calendar effects.
Although largely a pop psychology interpretation if they are seen as fully
repetitive, those effects seem in average to have some reality : in the above
mentioned periods, stocks often perform differently than in the others.
=> Some quantitative analysts even apply an "arbitrage coefficient" (baby
beta, see the "beta" glossary article) to those periods
But why this attraction to some periods?
Why the magnetic calendar on the market fridge?
This could signal that a temporary special mood makes
investors accept / want to:
* overpay / underpay the stocks they buy,
* or be overpaid / underpaid for those they sell.
Maybe each new time threshold (new year, new week...)
gives investors the impression of a new start in life.
They might see calendars as salamis and days, weeks, months as slices that
show a discrete instead of continuous time evolution (see the "time"
A specific factor is that analysts are often over optimist about
corporate earnings at the turn of the year and decide downward
revisions later (whence "in May, sell and go away").
On the other hand, the weather bias / effect (see that phrase) seems more
linked to physiological pleasure or pain.
The sun and its light tends to create euphoria.
Have you seen in Winter how travel agents cover their walls
with Mediterranean of Caribbean posters?
(*) To find those messages: reach that BF group and, once there,
1) click "messages", 2) enter your query in "search archives".
Members of the BF Group, please
vote on the glossary quality at BF polls