Tacitus

On the Best Time to Invest

I believe Jeremy Siegel's book Stocks for the Long Run had a chapter on calendar effects which discussed the November to April phenomenon, and a stockbroker author named Larry Williams also published a book in about 2002 called The Right Stock at the Right Time, which noted a number of calendar based patterns including this one, though it focused mostly on the decennial pattern of market tops and bottoms. As I recall, Siegel cited some academic work on this issue. I think Williams reported only his own research.

The more interesting issue is why the phenomenon exists. The most persuasive hypothesis I have heard is that the phenomenon is basically tax-related. That is, the end-of-year rejuggling of portfolios for tax purposes causes prices to spike in November, and the need to sell to pay taxes causes prices to drop in April. I suspect that the November buying spike is also associated with mutual fund managers needing to trade to improve on results that will be reported to shareholders in January. However, while the phenomenon pretty clearly exists, I'm not sure anyone will ever be able to prove exactly why it exists.