The effect that is derived from a historical observation or pattern entailing that securities perform better between the Halloween (October 31) and May 1. Most capital gains have been observed to materialize during the said period. This effect (also known as Halloween indicator) implies that investors would be actively involved in a stock market for that 6-month period, while retreating out of it for the other six months of the year. For example, investors who invest using the Halloween effect will buy stocks, after the Halloween, and eventually sell the stocks before the beginning of May next year.
Investors can enjoy a substantial part of annual profits, while taking on only a fractional part of the market exposure. It may turn out to be substantially less risky than investing in the market index across the board.
