Six month effect – everywhere and always

A paper published this month by Ben Jacobsen and Cherry Yi Zhang gives the results of a study that crunched the numbers on all available data for 108 stock markets to see how widespread the six month effect (aka Sell in May or Halloween effects) might be.

The authors found evidence for the effect in 81 out 108 countries, and of it being statistically significantly in 35 countries. The strongest six month effects were found among Western European countries for the past 50 years. They also found that the effect had been strengthening in recent years.

The following chart is from the paper and shows average returns for Nov-Apr periods (back row) compared to average returns for May-Oct periods for developed markets.

But they still could not come up with an explanation for the effect. They were (rightly) sceptical of the SAD (seasonal affective disorder) hypothesis – whereby investors become more risk-averse as nights lengthen in the autumn and vice versa in the spring. (If this hypothesis was correct then surely the effect would be reversed in Australia and New Zealand – which it isn’t.) The authors’ best conjecture as to the cause of the six month effect was summer holidays.

The first mention of the market adage “Sell in May” the authors found was in the Financial Times of 10 May 1935-

A shrewd North Country correspondent who likes a stock exchange flutter now and again writes me that he and his friends are at present drawing in their horns on the strength of the old adage “Sell in May and go away.”


A “stock exchange flutter” – does anyone say this any more? The Concise Oxford Dictionary defines a flutter as-

a state or sensation of tremulous excitement.

So, if you want some tremulous excitement, this is the place.

See also

Further articles on the Sell in May Effect.

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