Are investors moonstruck? Lunar phases and stock returns (2006) | Hacker News Reader

Are investors moonstruck? Lunar phases and stock returns (2006)

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25 pointsHooke10 comments

It's worth noting the less-than-well-known saying that "correlation does not imply correlation" (which is a very nice turn of phrase too). [1] In the introduction they say the effect is significant at the 5% level, which for an exploratory data analysis doesn't mean much.

[1] http://andrewgelman.com/2014/08/04/correlation-even-imply-co...

Reddit discussion

https://www.reddit.com/r/investing/comments/5fd8q3/to_predic...

Since I said "correlation does not imply correlation", not "correlation does not imply causation", I'm not sure what you're replying to.

If you're not sure just ignore it. It's there for everybody else.

It explains what "correlation doesn't imply correlation" means to those of us who have never heard it before.

More likely there are cyclical effects that compounded together have a phase similar to the moon cycle. These kinds of effects are actually quite common if you have the data and computing power to mine for them. So there is likely an indirect causal element at play here. It's just not the moon.

The problem is that this is sometimes wrong in a big way. Once you account for commissions, the need for risk controls (few investors will tolerate 20%+ drawdowns), and the need to realize returns intermittently I doubt this will outperform the S&P by more than a little bit. Even if there is some statistical edge here, it would require massive sums of money which would probably hurt returns due to market distortion effects.

To truly take advantage of something like this you have to also use plenty of other signals and understand their relationships to develop a strategy that scales even if your signal loses some predictive power.

Interesting study, but I think the experimental design was pretty weak. The Moon Affects The Stock Market is a trendy headline, but the results are basically meaningless without a plausible method of action.

I'd like to see some data about why the moon affects the stocks. If it were me, I'd break the data in to smaller time series and try to control for the known effects of the moon. Does the full moon have the same effect on the stock market on overcast nights as it does on clear nights? Is the effect significant for countries and cities with lots of artificial lighting compared to those where the moon provides more artificial light?

Personally, I'd be interested in how stocks traded at particular exchanges did. I live in Chicago right now, and the light pollution is so bad I barely notice the moon. I'm always amazed by how much a full moon illuminates the world when I am elsewhere. Does the full moon keep people up at night? Maybe people stay out later when the moon is full because the world is more brightly lit. Then they show up to the markets tired/hungover, affecting market performance. Chicago has a HUGE financial sector. If controlling for the city is too difficult, you may be able to look at commodities, like grain, since Chicago has a huge commodity exchange.

IANAA (I am not an astrologer), but I have a hunch they'd say it has to with "energy", not light ;)

If you haven't noticed, people are more wild just before a full moon. Always a good idea to plan parties the night before.

This is just my observation but I've found it to be very helpful in social situations. I could, from an empirical pov, understand this to be true in trading as well.

Isn't a more likely answer that calendar months affect stock?

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