Dec

5

Not too many days ago the New York Times published an article by Mark Hulbert which claimed some credibility for certain phases of the Moon’s cycle to be more profitable than others. In particular the academic paper cited claimed to show evidence that buying the market during new Moon phases was more profitable than full moons.

The Moon has the following cycles besides the roughly 12 hour daily tidal cycles:

To evaluate whether this cycle was even plausible, the correlation between market days 18, 19, 20 and 21 day s apart were considered. These would correspond to calendar day lags of 26 through 30 days. Data used were the Dow Industrials ln of the price relatives based on adjusted closes going back to 1950. This was a total of a little over 14000 daily observations.

Lag Correlation
18 -.24%
19 -.71%
20 .11%
21 -.81%

All of the above correlations are less than 1% and are clearly quite consistent with randomness.

A review of the Saros cycle of 6585 days using trading day lags of 4545 through 4558 yielded the following correlations:

Lag Correlation
4545 -.84%
4546 -.36%
4547 1.21%
4548 .85%
4549 -.64%

Again we have a result which is completely consistent with randomness. One wonders if studying moonbeams too long can lead to lunacy.


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