Breaking the Friday the 13th Myth
by Jon Scaccia September 13, 2024What the Stock Market Really Tells Us
It’s Friday the 13th—an ominous date for some, marked by superstition and fear. But what if I told you that this notorious day, so often avoided by the overly cautious, is actually something of a lucky charm for global stock markets? Buckle up, because the real story behind this “unlucky” day might surprise you, and it could even change the way you view financial markets forever.
Why Friday the 13th Matters to Investors
For centuries, Friday the 13th has been surrounded by myths, folklore, and superstition. From the days of ancient numerology to modern horror films, the date has been considered a bad omen. The idea that something as mundane as a calendar date could influence stock prices seems laughable—yet, there’s a fascinating twist. Studies have shown that global stock markets behave in a very unusual way on Friday the 13th. Rather than crashing or spiraling downward as superstition would suggest, stocks have been observed to perform exceptionally well on this day.
Does this mean that investors should start circling Friday the 13th on their calendars and preparing for financial windfalls? The answer is more complicated, but the insights uncovered by economists and researchers are both surprising and deeply illuminating.
Anomalies in Financial Markets: A Global Perspective
The idea that markets are efficient is central to modern financial theory. Simply put, this means that stock prices should reflect all available information, and anomalies—like a superstition-driven day—shouldn’t affect prices. But a closer look at international stock market data, as explored in a study covering markets from 19 countries over 12 years, reveals that Friday the 13th often yields statistically higher returns compared to regular Fridays.
This finding is not just a statistical blip. Researchers have found that the average returns on Friday the 13th outpace those on other Fridays in markets like Germany, Japan, and the UK(friday13_philosoph). It seems counterintuitive, but the numbers don’t lie.
What Could Explain This “Lucky” Day?
So, what’s going on here? If Friday the 13th is so steeped in negative connotations, why would stock markets show higher-than-usual returns? There are a few possible explanations, each grounded in different schools of thought within finance and psychology.
One explanation could be rooted in investor behavior. Stock markets are not driven solely by cold, rational calculations—the collective emotions and biases of investors also sway them. Behavioral finance tells us that emotions like fear, greed, and even superstition can play significant roles in how people invest. While most people may laugh off Friday the 13th as a silly superstition, there’s always a small voice in the back of their heads wondering if they should stay out of the market on that day. But, in doing so, fewer people trade, and the market remains more stable—perhaps even more likely to rise.
Another theory lies in market psychology and expectations. Because Friday the 13th has a reputation for being an unlucky day, some investors might expect a market dip and stay on the sidelines. This can create an environment of low liquidity and reduced volatility, paradoxically leading to higher average returns as demand for stocks doesn’t meet the low supply on that day. It’s a subtle reminder that human psychology—and not just data—has a profound effect on how markets behave.
A New Financial Paradigm?
The study of market behavior on days like Friday the 13th challenges the dominant idea that markets are always efficient. This concept is central to the Capital Asset Pricing Model (CAPM), which assumes that all information is reflected in stock prices and anomalies like superstition-driven behavior shouldn’t impact the market. But the data suggests otherwise.
Think of it like this: Imagine you’re driving on a winding mountain road, one that’s known for accidents. You’ve heard all the rumors about it being haunted and dangerous, so you drive slower, taking extra care. In the end, you reach your destination safely because you were cautious—but the road wasn’t dangerous after all. It was your heightened attention that made the difference. Similarly, investors’ wariness of Friday the 13th may contribute to market stability, resulting in a positive impact on stock returns(friday13_philosoph).
Why This Discovery Matters Now
This research has real-world implications, especially in today’s volatile markets. The idea that irrational beliefs can drive rational outcomes is more relevant than ever. In an age where news spreads rapidly across social media, sentiment and perception can change the course of markets in an instant. Consider the GameStop trading frenzy in 2021, where collective belief in a stock’s rise—despite its shaky fundamentals—sent its price soaring. The same can be said for Bitcoin, which has often surged based on speculative hype rather than concrete value.
Understanding that anomalies like the Friday the 13th effect exist encourages us to think critically about the stories we tell ourselves about risk and reward. It serves as a reminder that the forces shaping financial markets are complex, and human nature plays a significant role in shaping outcomes.
Moving Beyond Superstition
At first glance, the idea that a “cursed” date could affect global financial markets might seem absurd, but it speaks to the broader issue of how investors make decisions. While Friday the 13th might appear as a quirky statistical anomaly, it’s a window into the ways that our cognitive biases and emotions can influence rational decision-making.
For investors, this finding should serve as a call to stay informed but also to keep an open mind. Markets, much like people, don’t always behave the way we expect them to. If we dismiss something because it seems irrational, we might miss out on important insights. Whether it’s Friday the 13th or the latest social media craze, sometimes it’s worth looking beyond the surface to understand the forces driving change.
Join the Conversation
- Have you ever noticed unusual patterns in the stock market that defy logic or common financial theories?
- Do you think that human emotions and superstitions will always play a role in market behavior, despite advances in financial technology?
Let’s hear your thoughts!
Unlock Science Secrets:
Discover revolutionary research and innovative discoveries with ‘This Week in Science’! Designed for educators and science lovers, our free weekly newsletter offers insights that can transform your approach to science. Sign up now and deepen your understanding and passion for science. If you liked this blog, please share it! Your referrals help This Week in Science reach new readers.
Leave a Reply