Calendar Effect (Stock Market) – Definition

Cite this article as:"Calendar Effect (Stock Market) – Definition," in The Business Professor, updated July 30, 2019, last accessed October 21, 2020,


Calendar Effect Definition

The calendar effect refers to changes in the market price or market index due to how particular days, months or times of the year relate with prices of commodities in the market. There is a collection of theories that ascertain that some days, months and times have some significant relationships with prices of commodities, this relationship however indicate either a good or bad time to invest in the market.

Popular theories under the calendar effect include October effect, january effect, Monday effect and Halloween effect. The calendar effect show apparent behaviors of commodities in the stock market due to their relationship with certain periods.

A Little More on What is Calendar Effect

Evidence provided by theories in the calendar effect are not totally reliable, though some of these evidence have statistical backings. Investors in the stock market know whether it is a good time for investment or a bad time through the evidence provided by these theories.

For example, the October effect which is one of the most popular theories in the calendar effect maintains a position that the greatest crashes in stock market do happen in October, it backs this position up with evidence and historical records. For instance, the market crashed in 1929 and 1987 both happened in October. However, there is no statistical evidence that supports this position.

Other Examples of the Calendar Effect

Other theories in the calendar effects include the Monday effect, Halloween effect, January effect and others. Another good example of the calendar effect is the Super Bowl effect known by sports fans. This effect maintains a position that the outcome of Super Bowl for a particular year plays a major role in determining the performance of the stock market for the year. That means that stock performance can be predicted from the results of Super Bowl. Bear and bull markets are also predicted using the outcome of Super Bowl. although, this indicator has a record of 40 successes out of 50 attempts, it was argued that there is no actual relationship between the Super Bowl and the U.S stock market, the successes were just coincidental.

Reference for “Calendar effect”

Academic research on “Calender effect”

Stock Market Anomalies: A Calender Effect in BSE-SensexChandra, A. (2009). Stock Market Anomalies: A Calender Effect in BSE-Sensex. Whether inexplicable patterns of abnormal stock market returns are detected in empirical studies of the stock market, a return anomaly is said to be found. There are other similar anomalies existing in the stock market. Economically meaningful stock market anomalies not only are statistically significant but also offer meaningful risk adjusted economic rewards to investors. Statistically significant stock market anomalies have yet-unknown economic and/or psychological explanations. A joint test problem exists because anomalies evidence that is inconsistent with a perfectly efficient market could be an indication of either market inefficiency or a simple failure of Capital Asset Pricing Model (CAPM) accuracy. Some of the most-discussed about market anomalies are return anomaly, market capitalization effect, value effect, calendar effect, and announcement effect. Though various studies have been conducted to find out the presence of these anomalies across the stock markets worldwide, very few studies with reference to Indian stock market are available in the financial literature. This study aims to find the evidence of one of the anomalies, calendar effect in BSE Sensex, India’s leading stock exchange.

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