Ask Money

Stocks and the calendar

Chris Farrell Oct 6, 2011

Question: I know in this market everything goes, but statistically, when is the best day of the week to sell. I did some reading and its to be ‘sell on Monday’ but I’ve seen Fridays end with better numbers for lately. What do the numbers say? Thanks!! Big fan!! J, San Bernardino, CA

Answer: Well, with all the volatility in the stock market I wonder how much of an effect the calendar really has on returns and trading patterns. That is, assuming there is a regular calendar effect you can take profitably take advantage of when buying and selling stocks.

Scholars and Wall Street traders have uncovered numerous seasonal and calendar anomalies in the market, such as the January effect, the Santa Claus rally, and so on.

The Monday-effect says it’s the one day of the week that averages a negative rate of return. The Beginning-of-the-day effect reflects that stocks prices have a tendency to rise in the first 45 minutes of trading. The End-of-the-day effect is based on the observation that stock prices typically go up toward the close of trading. The Friday-effect is that there is a bias towards a positive market performance at the end of the trading week.

I guess the message in the “anomalies” is that it’s best to sell on Friday. During the rest of the week sell either in the early moments of trading or toward the close of the market. Try to avoid selling on Monday. And, of course, reverse the message if you’re buying stocks.

That said, I can’t take the calendar effects too seriously. The patterns are fun to observe. I don’t think you can make money off them.

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