What is 'October Effect'

The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological expectation rather than an actual phenomenon. Most statistics go against the theory.

Explaining 'October Effect'

Some investors may be nervous during October because the dates of some large historical market crashes occurred during this month. Black Monday, Tuesday and Thursday all occurred in October 1929, after which came the Great Depression. In addition, the great crash of 1987 occurred on October 19, and saw the Dow plummet 22.6% in a single day.

Further Reading

Southeast Asian stock market linkages: evidence from pre-and post-October 1997
muse.jhu.edu [PDF]
… It provides a basis for measuring co-movement between different stock markets, which excludes the possible effects of exchange rate fluctuations … These results suggest that the effect of the October crash on the co-movements among national stock market returns lasted not …

The international crash of October 1987: causality tests
www.jstor.org [PDF]
… It provides a basis for measuring co-movement between different stock markets, which excludes the possible effects of exchange rate fluctuations … These results suggest that the effect of the October crash on the co-movements among national stock market returns lasted not …

Dangers of Regulatory Overreaction to the October 1987 Crash
heinonline.org [PDF]
… It provides a basis for measuring co-movement between different stock markets, which excludes the possible effects of exchange rate fluctuations … These results suggest that the effect of the October crash on the co-movements among national stock market returns lasted not …

To what extent did stock index futures contribute to the October 1987 stock market crash?
academic.oup.com [PDF]
… It provides a basis for measuring co-movement between different stock markets, which excludes the possible effects of exchange rate fluctuations … These results suggest that the effect of the October crash on the co-movements among national stock market returns lasted not …

International stock market linkages: Evidence from the pre-and post-October 1987 period
www.sciencedirect.com [PDF]
… It provides a basis for measuring co-movement between different stock markets, which excludes the possible effects of exchange rate fluctuations … These results suggest that the effect of the October crash on the co-movements among national stock market returns lasted not …

The day of the week effect on stock market volatility
link.springer.com [PDF]
… It provides a basis for measuring co-movement between different stock markets, which excludes the possible effects of exchange rate fluctuations … These results suggest that the effect of the October crash on the co-movements among national stock market returns lasted not …

Seasonality in the returns of defaulted bonds: the January and October effects
www.jstor.org [PDF]
… It provides a basis for measuring co-movement between different stock markets, which excludes the possible effects of exchange rate fluctuations … These results suggest that the effect of the October crash on the co-movements among national stock market returns lasted not …

Trading activity and price behavior in the stock and stock index futures markets in October 1987
www.aeaweb.org [PDF]
… It provides a basis for measuring co-movement between different stock markets, which excludes the possible effects of exchange rate fluctuations … These results suggest that the effect of the October crash on the co-movements among national stock market returns lasted not …