October Effect

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October Effect

A calendar effect in which the stock market declines in October. There is little evidence that the October effect is real, but some investors still fear it because the 1929 crash and the 1987 crash both occurred in October.

October Effect

What Does October Effect Mean?

A theory that postulates that stocks tend to decline during the month of October.

Investopedia explains October Effect

Some investors may be nervous during October because some large historical market crashes occurred during that 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. Today the October effect is considered a psychological expectation rather than an actual phenomenon. Most statistics go against the theory.

Related Terms:
• Bear Market
• Bull Market
• Behavioral Finance
• January Effect
• Swing Trading

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