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Calendar Effect

Definition

A calendar effect is any market anomaly or economic effect 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. The term sometimes includes multi-year effects, such as the 10-year cycle, or the 4-year U.S. presidential election cycle. It also sometimes includes time of day effects.

What is 'Calendar Effect'

A collection of assorted theories that assert that certain days, months or times of year are subject to above-average price changes in market indexes and can therefore represent good or bad times to invest. Some theories that fall under the calendar effect include the Monday effect, the October effect, the Halloween effect and the January effect.

Explaining 'Calendar Effect'

Most of the evidence for these effects is anecdotal, although there is a slight statistical case to be made for some of them, which is more than enough to encourage some investors to place their faith in them.

Proponents of the October effect, one of the most popular theories, argue that October is when some of the greatest crashes in stock market history, including 1929's Black Tuesday and Thursday and the 1987 stock market crash, occurred. While statistical evidence doesn't support the phenomenon that stocks trade lower in October, the psychological expectations of the October effect still exist.


Further Reading


Stock market anomalies: A survey of calendar Effect in BSE-SENSEX
papers.ssrn.com [PDF]
… Gao, L and G. Kling, (2005), “Calendar Effects in Chinese Stock Market”, Journals of Economics and Finance, 6 … G. (1995) “The impact of firm size differences on the day-of-the week effect: a comparison of major stock exchanges” Applied Financial Economics, 5, 151 …

Calendar effects in Chinese stock marketCalendar effects in Chinese stock market
eprints.soton.ac.uk [PDF]
… Gao, L and G. Kling, (2005), “Calendar Effects in Chinese Stock Market”, Journals of Economics and Finance, 6 … G. (1995) “The impact of firm size differences on the day-of-the week effect: a comparison of major stock exchanges” Applied Financial Economics, 5, 151 …

TESTING CALENDAR EFFECT ON NIGERIAN STOCK MARKET RETURNS: METHODOLOGICAL APPROACH.TESTING CALENDAR EFFECT ON NIGERIAN STOCK MARKET RETURNS: METHODOLOGICAL APPROACH.
search.ebscohost.com [PDF]
… Gao, L and G. Kling, (2005), “Calendar Effects in Chinese Stock Market”, Journals of Economics and Finance, 6 … G. (1995) “The impact of firm size differences on the day-of-the week effect: a comparison of major stock exchanges” Applied Financial Economics, 5, 151 …

Calendar effects in Eastern European financial markets: evidence from the Czech Republic, Slovakia and SloveniaCalendar effects in Eastern European financial markets: evidence from the Czech Republic, Slovakia and Slovenia
www.tandfonline.com [PDF]
… Gao, L and G. Kling, (2005), “Calendar Effects in Chinese Stock Market”, Journals of Economics and Finance, 6 … G. (1995) “The impact of firm size differences on the day-of-the week effect: a comparison of major stock exchanges” Applied Financial Economics, 5, 151 …

The congressional calendar and stock market performanceThe congressional calendar and stock market performance
www.sciencedirect.com [PDF]
… Gao, L and G. Kling, (2005), “Calendar Effects in Chinese Stock Market”, Journals of Economics and Finance, 6 … G. (1995) “The impact of firm size differences on the day-of-the week effect: a comparison of major stock exchanges” Applied Financial Economics, 5, 151 …

Lunar calendar effect: evidence of the Chinese Farmer's Calendar on the equity markets in East AsiaLunar calendar effect: evidence of the Chinese Farmer's Calendar on the equity markets in East Asia
www.tandfonline.com [PDF]
… Gao, L and G. Kling, (2005), “Calendar Effects in Chinese Stock Market”, Journals of Economics and Finance, 6 … G. (1995) “The impact of firm size differences on the day-of-the week effect: a comparison of major stock exchanges” Applied Financial Economics, 5, 151 …

Javanese lunar calendar effect (Primbon) on abnormal returnJavanese lunar calendar effect (Primbon) on abnormal return
papers.ssrn.com [PDF]
… Gao, L and G. Kling, (2005), “Calendar Effects in Chinese Stock Market”, Journals of Economics and Finance, 6 … G. (1995) “The impact of firm size differences on the day-of-the week effect: a comparison of major stock exchanges” Applied Financial Economics, 5, 151 …

Calendar effect: Do investors overreact to the seasonality of the US hotel Industry?Calendar effect: Do investors overreact to the seasonality of the US hotel Industry?
www.tandfonline.com [PDF]
… Gao, L and G. Kling, (2005), “Calendar Effects in Chinese Stock Market”, Journals of Economics and Finance, 6 … G. (1995) “The impact of firm size differences on the day-of-the week effect: a comparison of major stock exchanges” Applied Financial Economics, 5, 151 …



Q&A About Calendar Effect


How do proponents argue for the October Effect?

Proponents argue that October is when some of the greatest crashes in stock market history occurred including 1929's Black Tuesday and Thursday and 1987 stock market crash. While statistical evidence does not support phenomenon that stocks trade lower in October, psychological expectations still exist.

Are there statistical cases for these effects?

Yes, there is a slight statistical case for some of them.

What are some examples of calendar effects?

Some examples include the Monday effect, the October effect, the Halloween effect and the January effect.

What is the effect of Calendar on stock market?

The calendar effect is a collection of assorted theories that assert that certain days, months or times of year are subject to above-average price changes in market indexes and can therefore represent good or bad times to invest.

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