Is the 'Sell in May and Go Away' Adage the Result of an Election-Year Effect?

Abstract

While the sell-in-May effect appears to persist in the long run, the authors find that the anomaly is not present in non-election years (both mid-term and presidential elections). There is no significant difference between the May–October and November–April stock returns in non-election years. The observed sell-in-May effect is driven by poor stock returns in the May–October periods leading up to US presidential or congressional elections and subsequent strong performance in the November–April periods immediately following elections. The paper offers an election-year effect as an explanation of the sell-in-May anomaly that has been observed in the US stock market. Other possible explanations of the effect, such as seasonal affective disorder, the weather, and daylight savings time, have not gained widespread acceptance.

Keywords: Stock Market, Elections, Presidential, Midterm, Mid-Term Elections, Gubernatorial, Congressional Elections, Seasonality, Market Returns, Sell in May, Go Away

JEL Classification: G, G11, G14