The Halloween Effect and the Premature Burial of Efficient Markets
Every October, financial journalism performs a small act of necromancy. Out comes the “Halloween effect,” the finding that stocks tend to earn higher returns from November through April than from May through October. It gives apparent empirical backing to the old stock-market adage “Sell in May and go away.” The implied strategy is simple: Hold stocks during the historically stronger six months, then park your money in short-term government debt until Halloween rolls around again.
That sounds like trouble for a central idea in finance. The efficient markets hypothesis…
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