Halloween effect and active fund management

Citation:

Kenourgios D, Samios I. Halloween effect and active fund management. The Quarterly Review of Economics and Finance [Internet]. 2021;80:534-544.

Abstract:

The existence of a calendar anomaly in stock market returns, namely the Halloween Effect, was corroborated by Bouman & Jacobsen (2002). They claimed that returns during May to October are extremely affected by this phenomenon, and hence are lower in comparison with the respective of November to April. This paper investigates the existence of this anomaly in the field of mutual funds for the period 2008-2017. We provide evidence of a robust Halloween effect in the European equity mutual funds market. This effect still exists even after controlling for other seasonal anomalies and dividing our sample according to the size of the funds. Since this calendar anomaly is both statistically and economically significant, we show that an investment based on such seasonal anomaly can be more profitable and effective than the Buy & Hold Strategy without any risk increase. The significant higher returns in winter months are also resulting from close to zero or negative average returns during May to October as well as high positive returns during November to April. It is finally concluded that fund managers do not seem to believe in this anomaly, since they are not reducing their exposure to the equity markets during summer months.

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