Why Does September Hate The Stock Market?

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September. September. All anyone can talk about is September, it seems, and whether this year, like last year, will bring a fresh bout of economic turbulence.

On a purely big-picture level, it seems doubtful. While people tend to mistakenly think of the Lehman collapse as being some cataclysmic event that set off a crisis, it was obviously the culmination of many different trends, and events all Summer were building up to the September crescendo. We have nothing like that going on. If calamity does return it will probably be due to some specific, unexpected event.

At WSJ, Brett Arends looks at the September effect, and tries to figure out why or what it is? Surprise! Nobody has any clue whatsoever, and even after all these years, we’d guess it’s just statistical noise. Still, this part was interesting:

Some of the September or Halloween effect is caused by a few really bad years. But that’s not the whole story. To reduce the influence of outliers I looked instead at the median result since 1926 instead of the statistical mean. The performance gap between September and the other months shrank from 2 per cent to 1.4 per cent. That’s smaller, but it’s still a difference. The median September saw losses of just 0.07 per cent. But the median month for the rest of the year gained 1.37 per cent.

Read the whole thing >

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