A Santa Claus rally is a rise in stock prices in the month of December, generally seen over the final week of trading prior to the new year. The rally is generally attributed to anticipation of the January effect, an injection of additional funds into the market, and to additional trades which must, for accounting and tax reasons, be completed by the end of the year. Another reason for the rally may be fund managers “window dressing” their holdings with stocks that have performed well.
Santa Claus Rally
What is a ‘Santa Claus Rally’
A santa claus rally is a surge in the price of stocks that often occurs in the last week of December through the first two trading days in January. There are numerous explanations for the Santa Claus Rally phenomenon, including tax considerations, happiness around Wall Street, people investing their Christmas bonuses and the fact that the pessimists are usually on vacation this week.
Explaining ‘Santa Claus Rally’
Many consider the Santa Claus rally to be a result of people buying stocks in anticipation of the rise in stock prices during the month of January, otherwise known as the January effect.
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- Yes, Virginia, there is a Santa Claus Rally: statistical evidence supports higher returns globally – search.proquest.com [PDF]
- Seasonality in Stock and Bond ETFs (2001—2014): The Months Are Getting Mixed Up but Santa Delivers on Time – joi.pm-research.com [PDF]
- Assessing the" Santa Claus" Approach to Asset Allocation: Implications for Commercial Real Estate Investment – www.worldscientific.com [PDF]
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