what is the october effect 
the october effect refers to the belief that stocks tend to decline during the month of october it is considered to be more of a psychological expectation than an actual phenomenon as most statistics contradict the theory some investors may be nervous during october because some large historical market crashes occurred during this month along with the september effect which also predicts weaker markets during october actual evidence for the existence of the perceived market anomaly october effect is not very solid indeed october s 100 year stock market history has in fact been net positive that s in spite of being the month of the 1907 panic black tuesday thursday and monday in 1929 and black monday in 1987 when the dow plummeted 22 6 in a single day and remains arguably the worst single day decline in market history on a percentage basis 1understanding the october effectproponents of the october effect one of the most popular of the so called calendar effects argue that october is when some of the greatest crashes in stock market history occurred these include 1929 s black tuesday and black thursday and the 1987 stock market crash 2while statistical evidence doesn t support the phenomenon that stocks trade lower in october the psychological expectations for the october effect still exist the october effect however tends to be overrated despite the moniker this seeming concentration of dark market days is not statistically significant in fact september historically is more often down than october 3 and from a historical perspective october has marked the end of more bear markets than the beginning this makes october an interesting prospect for contrarian buying investors who tend to see a month negatively can create opportunities for others to buy during that month however the end of the october effect if it ever was a market force may be at hand as the month s stock market results have tended to be net positive on average over the past century or more october crashes