Do Moon Cycles Affect the Stock Market?

Monday was a new moon. You might not have noticed, but the stock market is apparently paying rapt attention. A study published in the Harvard Business Review reviewed 25 worldwide stock exchanges, and the authors found that annualized mean daily returns in G7 countries were higher around new moons than full moons. And not just slightly higher. Returns were two to three times higher during new moons in every single G7 country. Are full moons bad for both sleeping and stocks? Out: Bear Markets. In...Werewolf Markets?

Before you call your financial adviser to announce that you're replacing him with lunar calendar, let's gut check. Yesterday's new moon came on top of a 200 point sell-off in the Dow. Today, as of 11:30AM, stocks are tracking barely down across the globe. But let's at least hear out the loons who came up with this idea:

Ilia D. Dichev of the University of Michigan and Troy D. Janes of SUNY Buffalo... point out, if a full moon brings on depression and pessimism, as legend has it, mightn't it trigger a gloomy outlook about future cash flows, leading to risk-averse investing and causing stock prices--and returns on investments--to tank? Indeed, their comprehensive review of 25 stock exchanges over the past 30 years does show a strong correlation between lunar cycles and stock prices. The chart below illustrates findings for the G-7 nations, where, in every case, the annualized mean daily returns are higher around the new moon than around the full moon.

So to a certain extent, the graph above is merely a frivolous indicator that, hey, the stock market is one strange fish. But one has to admit, the trend is remarkably uniform across the G7. I have no idea how exactly superstition plays into investments, but as every person who's ever been gambling knows, betters use all sorts of superstitious tactics to increase their luck. Maybe these kind of logical fallacies play a bigger role than we even imagined. Or, you know, we could always chalk the whole thing up to werewolves.

(Hat Tip: Mike Nizza)

Update: The author of the HBR piece has an update that you can find here.