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Definition: Halloween Strategy
Halloween strategy is a strategy based on seasonality in which investors invest in stocks from October 31 (Halloween) to May 1 and sell all stocks before May 1 and refrain from investing in stocks till October 31.
Halloween Strategy is also called ‘Sell in May and Go Away’ strategy. This strategy is based on the theory that during October to May market rises and it gives good returns and during May to October market slows down and doesn’t give expected returns. It is not accepted in academics because academicians believe that it is a superstition to believe in this theory. However, Bouman and Jacobsen analysed the effect and found out that this strategy worked in 36 out of 37 markets.
Halloween strategy contradicts ‘Efficient-market Hypothesis’ theory which states that making a profit by buying and selling of stocks involve more of a chance then analysis. Efficient-market Hypothesis is against fundamental analysis and technical analysis of stock.