Explanations for the September Effect
The September effect is not limited to U.S. stocks but is associated with most worldwide markets. Some analysts consider that the negative effect on markets is attributable to seasonal behavioral bias as investors change their portfolios at the end of summer to cash in.
Another reason could be that most mutual funds cash in their holdings to harvest tax losses. Another particular theory points to the fact the summer months usually have lightly traded volumes, as a good number of investors usually take vacation time and refrain from actively trading their portfolios during this downtime.
Once the fall season begins and these vacationing investors return to work, they exit positions they had been planning on selling. When this occurs, the market experiences increased selling pressure and, thus, an overall decline.
Additionally, many mutual funds experience their fiscal year end in September. Mutual fund managers, on average, typically sell losing positions before year end, and this trend is another possible explanation for the market's poor performance during September.
https://www.investopedia.com/ask/answers/06/septworstmonth.asp
The September effect is not limited to U.S. stocks but is associated with most worldwide markets. Some analysts consider that the negative effect on markets is attributable to seasonal behavioral bias as investors change their portfolios at the end of summer to cash in.
Another reason could be that most mutual funds cash in their holdings to harvest tax losses. Another particular theory points to the fact the summer months usually have lightly traded volumes, as a good number of investors usually take vacation time and refrain from actively trading their portfolios during this downtime.
Once the fall season begins and these vacationing investors return to work, they exit positions they had been planning on selling. When this occurs, the market experiences increased selling pressure and, thus, an overall decline.
Additionally, many mutual funds experience their fiscal year end in September. Mutual fund managers, on average, typically sell losing positions before year end, and this trend is another possible explanation for the market's poor performance during September.
https://www.investopedia.com/ask/answers/06/septworstmonth.asp
Last edited by a moderator:
