Sell in May

Sell in May and go away is an investment strategy for stocks based on a theory (sometimes known as the Halloween indicator) that the period from November to April inclusive has significantly stronger stock market growth on average than the other months. In such strategies, stocks are sold at the start of May and the proceeds held in cash (e.g. a money market fund); stocks are bought again in the autumn, typically around Halloween. 'Sell in May' can be characterised as the belief that it is better to avoid holding stock during the summer period. Sell in May and go away is an investment strategy for stocks based on a theory (sometimes known as the Halloween indicator) that the period from November to April inclusive has significantly stronger stock market growth on average than the other months. In such strategies, stocks are sold at the start of May and the proceeds held in cash (e.g. a money market fund); stocks are bought again in the autumn, typically around Halloween. 'Sell in May' can be characterised as the belief that it is better to avoid holding stock during the summer period. Though this seasonality is often mentioned informally, it has largely been ignored in academic circles. Analysis by Bouman and Jacobsen (2002) shows that the effect has indeed occurred in 36 out of 37 countries examined, and since the 17th century (1694) in the United Kingdom; it is strongest in Europe. Data show that stock market returns in many countries during the May–October period are systematically negative or lower than the short-term interest rate. This appears to invalidate the efficient-market hypothesis (EMH), which predicts that any such returns (e.g., from shorting the market) would be bid away by those who accept the phenomenon. Alternative causes include small sample size or time variation in expected stock market returns. EMH predicts that stock market returns should not be predictably lower than the short-term interest rate (risk free rate).