A calendar effect is any market anomaly or economic effect which appears to be related to the calendar. Such effects include the apparently different behaviour of stock markets on different days of the week, different times of the month, and different times of year (seasonal tendencies). The term sometimes includes multi-year effects, such as the 10-year (decadal) cycle, or the 4-year U.S. presidential election cycle. It also sometimes includes time of day effects.
Examples include:
- Halloween indicator (or the 'Sell in May' principle)
- January effect
- January barometer
- Mark Twain effect
- Monday effect
- Weekend effect
- Turn-of-the-Month effect
In their 2001 paper Dangers of data mining: The case of calendar effects in stock returns (Journal of Econometrics), Sullivan et al. argue that there is no statistically significant evidence for calendar effects in the stock market, and that all such patterns are the result of data dredging.
Market prices are often subject to seasonal tendencies because the availability and demand for an item is not constant throughout the year. For example, natural gas prices often rise in the winter because that commodity is in demand as a heating fuel. In the summer, when the demand for heat is lower, prices typically fall.
Seasonal patterns are not confined to prices; many other systems can exhibit the same kind of calendar effect. However, the term is most often used in an economic context.
Famous quotes containing the words calendar and/or effect:
“To divide one’s life by years is of course to tumble into a trap set by our own arithmetic. The calendar consents to carry on its dull wall-existence by the arbitrary timetables we have drawn up in consultation with those permanent commuters, Earth and Sun. But we, unlike trees, need grow no annual rings.”
—Clifton Fadiman (b. 1904)
“Whenever any form of government shall become destructive of these ends, it is the right of the people to alter or to abolish it, & to institute new government, laying it’s foundation on such principles & organising it’s powers in such form, as to them shall seem most likely to effect their safety & happiness.”
—Thomas Jefferson (1743–1826)