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Kates, that research has been well publicised. It is now about 10 years old. it has also been replicated by others going about the research in a very similar manner.

The research you quote does suggest some reasonable statistical relationship between moon cycles and stock market returns. Those papers were generated by finance and business students - who are not necessarily all that sophisticated in statistical analysis. They have done some basic statistic courses which they use in their analysis. That doesn't make them experts in statistics.

Somewhat more sophisticated research by statisticians looking at the evidence suggests otherwise, e.g.,:

"The final charts present the average daily detrended S&P 500 index returns from 11 trading days before new and full moons to 11 trading days after new and full moons. The total interval covered in each chart is roughly a month, but mismatches between lunar and monthly cycles introduce differences between them. We detrend by subtracting the average daily return for the entire sample period from the raw average returns for each trading day in the intervals tested. These charts provide some insight into the less granular results above. However, the lack of systematic variation in daily returns undermines belief in the lunar cycle as the explanation of new-full and wax-wane differences in average returns."

See:

http://www.cxoadvisory.com/3808/calendar-effects/lunar-cycle-and-stock-returns/

Physicist Charles Pennington also noted the findings you have quoted - but went on to say:

"Cautions regarding findings (as noted above) include:

"Levels of outperformance are small compared to market variability, so trading them is very risky.

"Levels of outperformance are not convincingly consistent across subperiods and daily returns."

That's also noted in the CXOAdvisory article.

There is a widely held myth which relates lunar cycles to human behaviour. Rotton and Kelley between them have surveyed over 100 academic papers examining the effects of the moon on behaviour including such things as: homicides, other criminal offences, suicides and self-harm, psychiatric disturbances, psychiatric admissions, crisis telephone calls, traffic accidents, human nutritional intake and many other human phenomena. They could find no relationship supporting a lunar behavioural hypothesis.

As there is no plausible connection between human behaviour and lunar cycles and certainly no statistical correlation - why should we take any notice of lunar cycles in making investment decisions

If would be very odd, indeed, if the moon has no effect on human behaviour, except one particular aspect of human behaviour - the behaviour of the stock markets.

Of course, the best known spurious correlation for the stock market return is butter production in Bangladesh. Nothing can beat that correlation. Would anybody really think it advisable to invest in the stock market based on rises and falls in butter production in Bangladesh. Any body suggesting that is just plain silly? Why? There is no plausible connection between the two.

There's a beguiling case that somehow we can beat the market by following lunar cycles. It's based in the folk lore surrounding human behaviour and the moon. it simply doesn't exist.

If it was really that simple - then the effect would disappear. It would be arbitraged away. That's the way the market works.

Redbacka