What is a ‘Halloween Strategy’
A Halloween strategy is an investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market until October 31, in order to increase capital gains. The Halloween strategy is based on the premise that most capital gains are made between October 31 (Halloween) and May 1, and that the other six months of the year should be spent investing in other investment types or not at all.
Explaining ‘Halloween Strategy’
The Halloween strategy is closely-related to the phrase, “Sell in May and then walk away,” referring to the six months between May 1 and October 31. This strategy is heavily based on the concept of seasonality, specifically that stocks perform better in the winter months than they do in the summer months. This strategy is contrary to the buy-and-hold strategy, in which an investor may ride out down months.
Further Reading
- The Halloween indicator," Sell in May and go away": Another puzzle – pubs.aeaweb.org [PDF]
- Halloween or January? Yet another puzzle – www.sciencedirect.com [PDF]
- The Halloween effect and Japanese equity prices: Myth or exploitable anomaly – link.springer.com [PDF]
- Are stock markets really so inefficient? The case of the “Halloween Indicator” – www.sciencedirect.com [PDF]
- Market efficiency in the Greek stock exchange: the halloween effect – grafis.unipi.gr [PDF]
- The Halloween effect: trick or treat? – www.sciencedirect.com [PDF]
- The Halloween effect anomaly: Evidence from some Arab countries equity markets – journals.qu.edu.qa [PDF]
- The Halloween effect in European sectors – www.sciencedirect.com [PDF]
