what is the halloween strategy 
the halloween strategy is a market timing strategy it is based on the hypothesis that stocks perform better from oct 31 halloween to may 1 than the rest of the year the halloween strategy posits that it is prudent to buy stocks in november hold them through the winter months and sell them in april while investing in other asset classes from may through october understanding the halloween strategyas noted above the halloween strategy aims to capitalize on gains by timing the stock market it refers to a tactic where investors buy stocks in november and sell them in april investors who subscribe to this theory typically choose defensive stocks and assets after they ve sold their stocks which is during the summer months the idea that investors can time the market is contrary to the buy and hold strategy in which an investor may ride out down months and invest for the longer term the superior results seem to contradict the premise of the efficient market hypothesis and that stocks behave in a completely random manner this strategy is closely related to the oft repeated advice to sell in may and go away some variation of this strategy has been around for quite a long time the axiom that was often coined in financial media was also repeated over the last two centuries and its longer version was some variation of these words sell in may go away come again st leger day the halloween strategy is also referred to as the halloween effect or halloween indicator special considerationsmany believe that the notion of abandoning stocks every may began in the united kingdom where the privileged class would leave london and head to their country estates for the summer largely ignoring their investment portfolios only to return in september those who subscribe to this notion would likely expect that it is common for salesmen traders brokers equity analysts and others in the investment community to leave their metropolitan financial centers in summer in favor of oases like the hamptons in new york nantucket in massachusetts and their equivalents elsewhere sven bouman and ben jacobsen published a paper in the american economic review that specifically studied the performance of stocks during the period from november to april and dubbed this the halloween indicator in their observation an investor who uses the halloween strategy to be fully invested for one six month period and out of the market for the other six months of the year would theoretically reap the best part of an annual return but with just half the exposure of someone who invests in stocks year round 1some who subscribe to the halloween strategy advise investors not to invest at all during the summer months halloween strategy performancethe halloween strategy does have evidence worthy of consideration historical stock returns suggest that the premise of the halloween strategy has been mostly true that the months from november through april have provided investors with stronger capital gains than have the other months of the year results also show that selling in may is successful in beating the market more than 80 of the time when this strategy is used over a five year horizon it is more than 90 successful in beating the market when used within a 10 year time frame 2the graph below displays the halloween effect for u s stocks for the comparable periods from 1970 to 2017 and 1991 to 2017 it indicates that the return on the standard poor s 500 s p 500 is much higher from november through april than it is from may through october 