Monday, October 10, 2022

Lunar Phases and Stock Returns | Kathy Yuan et al.

Kathy Yuan, Lu Zheng & Qiaoqiao Zhu (2002) - This paper investigates the relation between lunar phases and stock returns for a sample of 48 countries. We find strong global evidence that stock returns are lower on days around a full moon than on days around a new moon. Constructing a lunar trading strategy, we find that the magnitude of this return difference is roughly 4.2 percent per annum.  
Since lunar phases are likely to be related to investor mood and are not related to economic activities, our findings are thus not consistent with the predictions of traditional asset pricing theories that assume fully rational investors. The positive association we find between lunar phases and stock returns suggests that it might be valuable to go beyond a rational asset pricing framework to explore the psychological effects of investor behavior on stock returns. 

Figure 1 - Average Daily Return of the Global Portfolio by Lunar Dates

Figure 2 - Average Daily Stock Returns of Global Portfolio by Lunar Windows

Figure 3 - Distribution of Full Moon Days on Days of Week