ETF’s To Capture the Lucrative ‘Halloween Effect’

Posted by Don Vialoux -Timing & Trends - Equity Clock

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Remember the “Halloween effect” for equity markets; it will improve your stock market performance.

The Halloween effect states that investors will significantly outperform the stock market by “buying the market” on October 31 and selling on April 30. Ben Jacobsen and Cherry Zhang of Massey University in New Zealand checked out the Halloween effect by examining 300 years of market data in 108 countries. They determined that stock market returns from November through April were on average 4.52 per cent higher than those between May and October. Over the past 50 years, the average difference was 6.25 per cent.

Prior to the release of Messrs. Jacobsen and Zhang’s study, I completed a research report examining the TSX Composite Index during the November to April period that found similar results. First sentence in the report summarized the phenomenon: “Buy when it snows, sell when it goes”. Ironically, the weather forecast for Toronto this Halloween is for the season’s first snow.

Why does the Halloween Effect occur? Two reasons are prominent: The November to April period features two periods of seasonal economic growth, the Christmas buying season and the spring buying season. The May to October periods features a period of above average volatility.

Thackray’s 2014 Investor’s Guide notes that the S&P 500 Index and the TSX Composite Index on average have an optimal entry date on October 28 and an optimal exit date on May 5. Dates are based on S&P 500 data for the past 63 years and TSX Composite data for the past 37 years.’s seasonality charts for the past 20 years show a similar picture.


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