30 Oct 2012

Stock markets slip in summer - study

7:06 am on 30 October 2012

There is some truth to the financial markets adage to sell in May and go away, even in New Zealand.

A study by Massey University says the Halloween effect - which suggests stock returns are better in the northern hemisphere's winter than in summer - is borne out.

It was first tested in 2002 by Professor Ben Jacobsen and Sven Bouman, which found stock markets in 36 of 37 countries studied show substantially higher returns during November to April.

With his colleague Cherry Zhang, Professor Jacobsen says the latest study encompassed 108 countries, and more than 55,000 monthly observations, some going back over 300 years.

He says the Halloween strategy still worked, which at best, he puts downs to investors going on vacation, which reduced trading activity.

Professor Jacobsen says the simple Halloween strategy beats the market more than 80% of the time over a five year period. and up to 90% if an investor expands it to 10 years.

He's adopted the strategy, getting out of stocks from May, and investing in fixed interest assets until late October.