October Effect

What does it mean?
A theory that postulates that stocks will tend to decline during the month of October.

In Other Words...
Some investors may be nervous during October since the dates of some large historical market crashes occurred during this month. Black Monday, Tuesday and Thursday all occurred in October 1929, after which came the Great Depression. In addition, the great crash of 1987 occurred on October 19th, and saw the Dow plummet 22.6% in a single day. Today the October effect is considered mainly to be a psychological expectation rather than an actual phenomenon: most statistics go against the theory.

Related Links
The Madness of Crowds - When faced with the puzzling yet undeniable power of the crowds, the rational trader is left with some perplexing questions.

Related Terms
Behavioral Finance | Black Monday | Black Thursday | January Barometer | January Effect | Weekend Effect

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