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Publication Are stock markets really so inefficient? The case of the Halloween indicator

Type

Refereed Article

Year

2013

Author(s)

Hubert Dichtl

Wolfgang Drobetz

Journal

Finance Research Letters

Volume

11

Pages

112-121

Research Area

Capital Markets

Keywords

Sell in May, stock market anomaly, predictive ability

Abstract

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.

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