Are Investors Always Rational?

The Harvard Business Review, in its current issue, has an interview with Savva Shanaev on correlations between stock market movements and the calendar. (HBR reprint F2301B)

Shanaev and his colleagues mapped 100 years of U.S. stock market movements against the predictions for the coming of spring on Groundhog Day, when a groundhog in Pennsylvania is let out every February 2 to see his shadow.  If he does see his shadow, winter will last 6 more weeks and the stock market will be sluggish.  If he does not see his shadow, spring will come soon and the stock market will rise.

Also documented, according to Shanaev, is that the market tends to be at its worst from May to October.  Additionally, stocks tend to rise in January and market returns are lower than average at the start of the week – the “Monday effect.”  Other studies have found that stocks perform poorly around the full moon and when Mercury is in retrograde.

However, Shanaev said that the “Monday effect” is now so well-known that it has largely disappeared.