According to the results below, the average return was 0.18% (since 1992 until 2011). Efficient market theory would suggest that these phenomena do not exist, for rational investors would naturally front-run the rally…this would however create the rally and subsequent sell-off early and thus negating the whole thing. Another possible explanation includes the more psychological confirmation bias. This is basically the decision to favor information that confirms a thought, while negating or writing off information to the contrary. This could include media personalities supporting the myth, for it is naturally ‘nice’ to be bullish during the holiday. Similarly, the optimism bias can also relate, for a small sample set of prior events may sway opinions. For example, if the prior year was a good time for the market, which it was, one may be overly optimistic for the future, negating the larger sample set and only looking at one independent observation. Either way, the data is interesting and the market will move.
Below is the aforementioned excel sheet.
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