Does the Christmas holiday, a time of putative good will toward all, 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 five trading days before and the five trading days after the holiday. Using daily closing levels of the S&P 500 index for 1950-2009 (60 events), we find that:
The following chart shows the average daily S&P 500 index returns for the five trading days before (C-5 to C-1) and the five trading days after (C+1 to C+5) Christmas 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 from the trading day just before through the week after Christmas. As usual for daily data, noise generally dominates signal.
To check the reliability of the post-holiday strength, we look at two subsamples.
The next chart compares the average daily returns for the five trading days before and after Christmas for two subsamples: 1950-1989 (40 events), and 1990-2009 (20 events)....MORE