U.S. Stock Returns Around Thanksgiving

From the CXO Advisory blog:

Does the Thanksgiving holiday, a time of families celebrating plenty, give U.S. stock investors a sense of optimism that translates into stock returns? To investigate, we analyze the historical behavior of the S&P 500 Index during the three trading days before and the three trading days after the holiday. Using daily closing levels of the S&P 500 index for 1950-2008 (59 events), we find that...

The following chart shows the average daily S&P 500 index returns for the three trading days before (T-3 to T-1) and the three trading days after (T+1 to T+3) Thanksgiving over the entire sample period, with one standard deviation variability ranges. The mean daily return for all trading days in the sample is 0.03%. Results on average suggest abnormal strength and low volatility during the trading days just before and just after Thanksgiving. There is on average weakness the second day after the holiday, but the standard deviation of returns on this down day is very large. As usual for daily data, noise generally dominates signal.

To check the reliability of the holiday peak, we look at two subsamples.

The next chart compares the average daily returns for the three trading days before and after Thanksgiving for two subsamples: 1950-1989 (40 events), and 1990-2008 (19 events)...MORE