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22 noviembre 2006

Lunar Cycle Effects in Stock Returns

During the 15 days of the lunar month closest to the new moon — starting seven days before it and ending seven days after — the stock market’s average returns are much higher than those of the other half of the month.

The differences are quite large — as much as 10 percent a year, on average, depending on the stock index and the number of decades studied — and they are pervasive.

“if anything, the results are more pronounced for foreign countries.”

New moons and full moons do not occur on the same days of each month in the modern Western calendar. That is important, because it means that the stock market’s lunar cycle is not a disguised version of any other seasonal pattern based on that calendar.

A full moon, for example, increases our tendency to feel depressed and pessimistic, so investors may be more inclined to stay out of the stock market at or near that time.

The lunar effect appears strongest for the smallest-cap stocks — a finding that raises the researchers’ confidence in their psychological explanation. After all, according to Professor Zheng and her colleagues, relatively few institutional investors hold such stocks, and individuals are more likely to be affected by the lunar cycle

The strategy would succeed only about 60 percent of the time. Though that’s enough to make it profitable in the long term, you’d have to tolerate losses 40 percent of the time.