October Effect

AAA

DEFINITION of 'October Effect'

The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological expectation rather than an actual phenomenon. Most statistics go against the theory.

INVESTOPEDIA EXPLAINS 'October Effect'

Some investors may be nervous during October because the dates of some large historical market crashes occurred during this month. Black Monday, Tuesday and Thursday all occurred in October 1929, after which came the Great Depression. In addition, the great crash of 1987 occurred on October 19, and saw the Dow plummet 22.6% in a single day.

RELATED TERMS
  1. Black Thursday

    The name given to Thursday, Oct. 24, 1929, when the Dow Jones ...
  2. Behavioral Finance

    A field of finance that proposes psychology-based theories to ...
  3. January Effect

    A general increase in stock prices during the month of January. ...
  4. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) ...
  5. January Barometer

    A theory stating that the movement of the S&P 500 during ...
  6. Calendar Effect

    A collection of assorted theories that assert that certain days, ...
RELATED FAQS
  1. What options strategies are best suited for investing in the banking sector?

    The covered call option strategy allows investors to profit from the banking sector's stability and its track record for ... Read Full Answer >>
  2. What do mortgage lenders use the securitization food chain?

    The phrase "securitization food chain" was made popular by director Chris Ferguson in "Inside Job," a film about the 2007-2 ... Read Full Answer >>
  3. What caused Black Monday, the stock market crash of 1987?

    The cause of the stock market crash of 1987 was primarily program trading, used by institutions to protect themselves from ... Read Full Answer >>
  4. What caused the stock market crash of 1929 that preceded The Great Depression?

    The stock market crash of 1929 was due to a market that was overbought, overvalued and excessively bullish, rising even as ... Read Full Answer >>
  5. Can the Efficient Market Hypothesis explain economic bubbles?

    The efficient market hypothesis (EMH) cannot explain economic bubbles because, strictly speaking, the EMH would argue that ... Read Full Answer >>
  6. What role did junk bonds play in the financial crisis of 2007-08?

    Junk bonds were the at heart of the financial crisis of 2007-2008. Toxic assets related to the subprime housing market pushed ... Read Full Answer >>
Related Articles
  1. Active Trading Fundamentals

    An Introduction To Behavioral Finance

    Curious about how emotions and biases affect the market? Find some useful insight here.
  2. Active Trading Fundamentals

    How The Power Of The Masses Drives The Market

    Market psychology is an undeniably powerful force. Find out what you can do about it.
  3. Active Trading

    Market Cycles: The Key To Maximum Returns

    You need to understand the various phases of the market cycle to avoid bubbles and make the best investments.
  4. Budgeting

    The Greatest Market Crashes

    From a tulip craze to a dotcom bubble, read the cautionary tales of the stock market's greatest disasters.
  5. Investing

    Wizards Of Odd: A Trip To Tech Land

    I spent a couple of days in Silicon Valley, and here are some key lessons I learned after meeting with a number of tech CEOs and venture capitalist.
  6. Investing Basics

    The Dodd-Frank Wall Street Reform Act

    The Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly called Dodd-Frank, was passed in 2010. The goal of the act is to prevent another great recession like that of 2008, which ...
  7. Investing

    3 Major Risks For Annaly’s Investors

    Thanks to its double-digit dividend yield, Annaly Capital Management has long been a favorite among income-seeking investors.
  8. Credit & Loans

    Which Is One Of The Nation’s Safest Banks?

    While there's no such thing as a completely safe bank stock, it's hard to find one that comes closer to the mark than New York Community Bancorp .
  9. Economics

    Afraid Of A New Financial Crisis?

    It may be time for the U.S. to adopt a model for financial companies that better deters risky financial behavior.
  10. Professionals

    What is a SWOT Analysis?

    SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. SWOT analysis is a management tool used to identify strategies for success. It may be used to guide individual thinking, group ...

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center