Mercury retrograde effect in capital markets: truth or illusion?
Keywords:
beliefs, behavior, mercury retrograde, returns, volatilityAbstract
From the most ancient times, the astrological beliefs have played an important role in human history, thinking, world-views, language and other elements of social culture. The practice of relating the movement of celestial bodies to events in financial markets is relatively newer but despite the inconsistency between financial astrology and standard economic or financial theory, it seems to be largely spread among capital market traders. This paper evaluates one of the astrological effects on the capital market, more precisely the Mercury retrograde effect on US capital market. Despite the fact that it is just an optical illusion the astrological tradition says that Mercury retrograde periods are characterized by confusion and miscommunications. The trades could be less effective, the individuals more prone to make mistakes so there is a long-held belief that it is better to avoid set plans during Mercury retrograde, signing contracts, starting new ventures or open new stock market positions. The main findings of this study are lower return’s volatilities in the Mercury retrograde periods, inconsistent with the astrologic theories assumptions but consistent with the idea that trader’s beliefs in Mercury retrograde effect could change the market volatility exactly in the opposite sense than the predicted one.References
<p>Adamou,M. (2001). Relationship of the lunar cycle and the presentation of individuals with psychiatric problems to an accident and emergency department: a case – control study. <em>International Journal of Psychiatry in Clinical Practice,</em> 7, 115-116. doi: 10.1185/135525701317094476</p><p>Anginer, D., Hoberg, G. , & Seyhun, H. N. (2015). Can Anomalies Survive Insider Disagreements? Retrieved from: <a href="http://dx.doi.org/10.2139/ssrn.2625614" target="_blank">http://dx.doi.org/10.2139/ssrn.2625614</a></p><p>Ankerberg, J., & Weldon, J. (2011). <em>Astrology do the heavens rule our destiny</em>, New York:<em> </em>ATRI Publishing.</p><p>Barton, T. (1994). <em>Ancient Astrology</em>, New York: Routledge.</p><p>Bonner,W., & Rajiva,L.(2007). <em>Mobs, Messiahs, and markets: Surviving the public spectacle in finance and politics,</em> New Jersey : John Wiley &Sons.</p><p>Bost,T.(2012). <em>Mercury, money and the markets: profitable planetary cycles for short term astra-trading</em>, Palmeto: Harmonic Research Associates.</p><p>Burckhardt, T.(1969). The Seven Liberal Arts and the West Door of Chartres Cathedral, <em>Studies in Comparative Religion</em>, 3(3). Retrieved from: www.studiesincomparativereligion.com</p><p>Byrnes,G. & Kelly,I. (1992). Crisis calls and lunar cycles: a 20 – year review. <em>Psychological Reports, </em>71, 779-785. doi: 10.2466/pr0.1992.71.3.779</p><p>Coates,W., Jehle, D.,& Cottinghton,E.(1989).Trauma and the full moon: a waning theory. <em>Annals of Emergency Medicine,</em> 18, 763-765. <a title="Persistent link using digital object identifier" href="http://dx.doi.org/10.1016/S0196-0644(89)80014-9" target="_blank">doi:10.1016/S0196-0644(89)80014-9</a></p><p>Colby,R..W. (2003). <em>The Encyclopedia of Technical Market Indicators</em>, Second Edition CMT, Columbus: McGraw-Hill Publishing.</p><p>Cunningham, M.R. (1979). Weather, mood and helping behavior: Quasi-experiment with the sunshine samaritan. <em>Journal of Personality and Social Psychology,</em> 37, 1947–1956. doi: 10.1037/0022-3514.37.11.1947.</p><p>Denissen, J.J.A., Butalid, L., Penke, L., &Van Aken, M.A.G (2008). The effects of weather on daily mood: a multilevel approach. <em>Emotion, </em>8, 662-667. doi: 10.1037/a0013497</p><p>De Vries,M., Holland, R.W., Corneille,O., Rondeel,E., &Witteman,C.L.(2010). Mood effects in dominated choices: positive mood induces departures from logical rules. <em>Journal of Behavioral Decision Making,</em> 25(1),74-81. doi:10.1002/bdm.716</p><p>Dichev,I.D.& Janes,T.D. (2003). Lunar cycle effects in stock returns. <em>Journal of Private Equity, </em>6, 8-2. doi: 10.3905/jpe.2003.320053.</p><p>Dowling,M. & Lucey,B.M. (2005). Weather, biorhythms, beliefs and stock returns – Some preliminary Irish evidence. <em>International Review of Financial Analysis, </em>14, 337-355. doi:http://dx.doi.org/10.1016/j.irfa.2004.10.003.</p><p>Dowling, M, & Lucey, B.M. (2008a). Mood and UK equity pricing. <em>Applied Financial Economics Letters,</em> 4, 233 – 240. doi:10.1080/17446540701720584</p><p>Dowling, M, & Lucey, B.M. (2008b). Robust global mood influences in equity pricing. <em>Journal of Multinational Financial Management,</em> 18 , 145-164. doi<strong>: </strong>10.1016/j.mulfin.2007.06.002.</p><p>Forgas, J.P. (1995). Mood and judgment: the effect infusion model (AIM). <em>Psychological Bulletin, </em>117, 39-66. http://dx.doi.org/10.1037/0033-2909.117.1.39</p><p>Fu, F. & Huang, S. (2015). The Persistence of Long-Run Abnormal Returns Following Stock Repurchases and Offerings. <em>Management Science</em>. Research Collection Lee Kong Chian School Of Business. Retrived from: http://dx.doi.org/10.1287/mnsc.2015.2150.</p><p>Gerlach,J.R.(2007). Macroeconomic news and stock market calendar and weather anomalies. <em>The Journal of Financial Research,</em> 30, 283-300. doi: 10.1111/j.1475-6803.2007.00214.x.</p><p>Hicks-Caskey W.E. & Potter.D.R. (1992). Weekends and Holidays and Acting-out Behavior of Developmentally Delayed Women: A Reply to Dr. Mark Flynn. <em>Perceptual and</em> <em>Motor Skills,</em> 74, 344-346. doi: 10.2466/pms.1992.74.2.344</p><p>Hines,T.M. (1988). Comprehensive review of biorhythm theory. <em>Psychological Reports, </em>83, 19-64. doi: 10.2466/pr0.1998.83.1.19</p><p>Holden, J.H. (1996). <em>A History of Horoscopic Astrology</em><em> from the Babylonian period to the modern age</em>, Tempe:American Federation of Astrologers, Inc.,</p><p>Iosif,A. & Ballon, B.(2012). Bad mood rising: the persistent belief in lunar connection to madness. <em>Canadian Medical Association Journal,</em> 173, 1498-1500.</p><p>Hoffrage, U. (2004). Overconfidence. In R.F. Pohl(ed.) <em>Cognitive Illusions: a handbook on fallacies and biases in thinking, judgement and memory).</em> Sutherland: Psychology Press, pp.235-255.</p><p>Isen,A.M , Nygren,T.E., & Ashby,F.G. (1988). Influence of positive affect on the subjective utility of gains and losses: it is just not worth the risk. <em>Journal of Personality and Social Psychology,</em> 55, 710-717. doi:http://dx.doi.org/10.1037/0022-3514.55.5.710</p><p>Kamstra,M.J., Kramer,L.A & Levi,M.D.(2003). Winter blues: a SAD Stock market cycle. <em>The American Economic Review,</em> 93, 324-343.</p><p>Kahneman, D. & Tversky, A. (1973). On the psychology of prediction. <em>Psychological Review,</em> 80 (4), 237–251.doi: http://dx.doi.org/10.1037/h0034747</p><p>Kleinfield, N.R. (1988). Seeing dollar signs in searching the stars. New York Times, section3, p.1.</p><p>Krivelyova,A. & Robboti,C. (2003). Playing the field: geomagnetic storms and the stock market. <em>Federal Reserve Bank of Atlanta Working Paper 2003-5b.</em></p><p>Lambert, G.W., Reid, C., Kaye, D.M., Jennings, G.L.,& Esler, M.D. (2002). Effects of sunlight and season on serotonin turnover in the brain. <em>Lancet 360,</em> 1840–1842. <a href="http://dx.doi.org/10.1016/S0140-6736(02)11737-5" target="doilink">doi:10.1016/S0140-6736(02)11737-5</a></p><p>Liu,S.I. (2002). A Bayesian analysis of lunar effects on stock returns.Retrieved from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1366663.</p><p>Lo,A.W., & Hasanhodzic, J. (2011). <em>The evolution of technical analysis. Financial prediction from Babylonian tablets to Bloomberg terminals.</em>, New Jersey: John Wiley &Sons.</p><p>Martin,S., Kelly, I.,& Saklofske,D. (1992). Suicide and lunar cycles: a critical review over 28 years. <em>Psychological Reports, 71</em>, 787-895. doi: 10.2466/pr0.1992.71.3.787</p><p>Mathew, V.M., Lindesay,J., Shanmuganathan,N. & Eapen, V. (1991). Attempted suicide and the lunar cycle. <em>Psychological Reports,</em> 68, 927-930. doi: 10.2466/pr0.1991.68.3.927</p><p>Murgea, A. (2014). <em>Investment behaviour. Rationality, news asymmetry and mood misattribution,</em> Saarbrücken: Lambert Academic Publishing.</p><p>Nissim,B.D., Liran, L. , & Eshel,S. (2012). Do natural phenomena affect stocks’ yield in Israel? <em>Applied Financial Economics, </em>22: 127-133. <strong>doi:</strong>10.1080/09603107.2011.605753</p><p>Parrott, W.G., & Sabini, J. (1990). Mood and memory under natural conditions: evidence for mood incongruent recall. <em>Journal of Personality and Social Psychology 59</em>, 321–336. http://dx.doi.org/10.1037/0022-3514.59.2.321</p><p>Pasavento,L., & Smoleny,S. (2015).<em>A traders guide to financial astrology: forecasting market cycles using planetary and lunar movements</em>, New Jersey: John Wiley &Sons.</p><p>Persinger, M.A. & Levesque, B.F. (1983): Geophysical variables and behavior: XII: the weather matrix accommodates large portions of variance of measured daily mood. <em>Perceptual and Motor Skills </em>57, 868–870. doi: 10.2466/pms.1983.57.3.868</p><p>Pew Research Center (2009). <em>Many Americans mix multiple faiths. </em>Retrieved<em> </em>from<em> </em>http://www.pewforum.org/files/2009/12/multiplefaiths.pdf.</p><p>Pham, M.T.(2007). Emotion and rationality: a critical review and interpretation of empirical evidences. <em>Review of General Psychology, </em> 11, 155-178. doi: : 10.1037/1089-2680.11.2.155. http://dx.doi.org/10.1037/1089-2680.11.2.155</p><p>Schwarz,N. (2002). Situated cognition and the wisdom of feelings: Cognitive tuning. In L.F.Barrett and P.Salovery (eds.), <em>The wisdom in feelings: Psychological processes in emotional intelligence</em>.<em> </em>New York: Guilford Press, pp.144-166</p><p>Schwert, G.W.(2003). Anomalies and market efficiency in Constantinides, G.M.,. Harris M. and R. Stulz <em>Handbook of the Economics of Finance</em>, Elsevier Science B.V.</p><p>Thakur,C.P. , Thakur,B., Singh, S., Kumar B. (1987). Relation between full moon & medicolegal deaths. <em>Indian Journal of Medical Research, </em>85, 316-320.</p><p>Triedens,L.Z., & Linton,S. (2001). Judgment under emotional certainty and uncertainty: The effects of specific emotions on information processing. <em>Journal of Personality and Social Psychology Bulletin, 81</em>, 973-988. http://dx.doi.org/10.1037/0022-3514.81.6.973</p><p>Vance,D. (1985). Belief in lunar effects on human behavior. <em>Psychological Reports,</em>76, 32-34. doi: 10.2466/pr0.1995.76.1.32</p><p>White,W.(1914). Moon myth in medicine: the moon as libido symbol. <em>Psychoanalytic Review, </em>1, 241-256.</p><p>Yuan,K., Zheng,L., & Zhu,Q. (2006). Are investors moonstruck? Lunar phases and stock returns. <em>Journal of Empirical Finance </em>13: 1-23. <a href="http://dx.doi.org/10.1016/j.jempfin.2005.06.001" target="doilink">doi:10.1016/j.jempfin.2005.06.001</a></p><p>Eweje, G., & Palakshappa, N. (2009). Business partnerships with nonprofits: working to solve mutual problems in New Zealand. <em>Corporate Social Responsibility and Environmental Management, 16( 6),</em> 337-351.</p>
Downloads
Published
2016-10-13
Issue
Section
Articles
License
Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License. (CC BY-NC-ND 3.0) (Since 2014)
How to Cite
Mercury retrograde effect in capital markets: truth or illusion?. (2016). Timisoara Journal of Economics and Business, 9(1), 49-61. https://www.tjeb.ro/index.php/tjeb/article/view/TJEB9-1_49to61
