Monday 18 December 2017

Why even the US stock exchange gets a bit tipsy on St Patrick's Day

Thomas Molloy

HERE'S an investment strategy that some might like to try: betting on a St Patrick's Day bounce on the US stock markets next week.

The idea might sound crazy but academics Laura Frieder and Avanidhar Subrahmanyam gathered some powerful research that suggests the US stock market experiences a small but statistically important advance in the days before and after St Patrick's Day.

The two academics looked at trading on the S&P 500 around March 17 every year from 1946 to 2000 and concluded that there is an average 0.34pc increase in the two days before St Patrick's Day, a 0.07pc increase on the day itself and a 0.19pc increase the following day, which gives a total increase of 1pc or roughly the same returns as you would earn in a year from our increasingly uncompetitive banks.

The news was even better last year when the S&P 500 jumped 5.8pc during this four-day period following a 1.7pc increase the previous year.

The researchers conclude that the reasons behind these gains have little to do with leprechauns but quite a lot to do with market mood which is lifted by some festive occasions including St Patrick's Day which was until recently celebrated with considerably more gusto in New York than Dublin.

The researchers also suggest that the S&P 500 gets a boost from the so-called "triple witching" that sees stock options, index options and index futures all expire around St Patrick's Day.

Traders need to buy shares to settle these options and close their positions. The "triple witching" takes place four times a year.

The next deadline is March 19, so it is on course to provide a boost.

Anybody wanting to take a punt on the St Patrick's Day effect would need to buy into a fund tomorrow by buying exchange-traded funds such as highly liquid Standard & Poor's Depositary Receipts (NYSE: SPY) issued by State Street or Barclays Global Investors' iShares S&P 500, which can be bought by anybody with access to UK trading.

The study also looks at the Jewish holidays of Rosh Hashanah and Yom Kippur and concludes that volume tends to be lower On Rosh Hashanah and Yom Kippur, and concludes that returns are also higher around Rosh Hashanah but significantly negative after Yom Kippur.

Irish Independent

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