Are Stock Markets Really so Inefficient? The Case of the 'Halloween Indicator'
17 Pages Posted: 11 Aug 2013 Last revised: 12 Dec 2013
Date Written: September 2013
The old and simple investment strategy “Sell in May and Go Away” (also referred to as the “Halloween effect”) enjoys an unbroken popularity. Recent studies suggest that the Halloween effect even strengthened rather than weakened since its first publication by Bouman and Jacobsen (2002). We implement regression models as well as Hansen’s (2005) “Superior Predictive Ability” test to analyze whether stock markets are really so inefficient. In line with the predictions of market efficiency, our results reject the hypothesis that a trading strategy based on the Halloween effect significantly outperforms.
Keywords: Sell in May, stock market anomaly, bootstrap simulation, statistical inference
JEL Classification: G11, G12, G14
Suggested Citation: Suggested Citation