The Halloween Effect in U.S. Sectors

23 Pages Posted: 9 Jul 2009

See all articles by Ben Jacobsen

Ben Jacobsen

Tilburg University - TIAS School for Business and Society; Massey University

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance

Abstract

U.S. stock market sectors and industries perform better during winter than summer from 1926 to 2006. In more than two-thirds of sectors and industries, the difference in summer and winter returns, known as the Halloween effect, is statistically significant. There are, however, large differences across sectors and industries. The effect is almost absent in sectors related to consumer consumption but is strong in production sectors. We find that neither liquidity changes nor well-known risk factors can explain the anomaly. We illustrate how the differences between sectors and industries can improve the risk-return tradeoff using sector rotation.

Suggested Citation

Jacobsen, Ben and Visaltanachoti, Nuttawat, The Halloween Effect in U.S. Sectors. Financial Review, Vol. 44, No. 3, pp. 437-459, August 2009. Available at SSRN: https://ssrn.com/abstract=1432238 or http://dx.doi.org/10.1111/j.1540-6288.2009.00224.x

Ben Jacobsen

Tilburg University - TIAS School for Business and Society ( email )

Warandelaan 2
TIAS Building
Tilburg, Noord Brabant 5037 AB
Netherlands

Massey University ( email )

Auckland
New Zealand

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance ( email )

School of Economics and Finance
Private Bag 102904, NSMC
Auckland
New Zealand
64 9 414 0800 (43169) (Phone)
64 9 441 8177 (Fax)

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