Last Tuesday, August 22, marked the start of what is popularly known as “Ghost Month,” or the seventh month of the Chinese calendar. During this time, it is believed that the spirits of the deceased come from the afterlife and roam the world.
Because of its strong association with the dead and the afterlife, there are many superstitious practices observed throughout the month. Among these is the belief that entrepreneurs shouldn’t open any new businesses or bring in any new contracts or partnerships during ghost month, as these will be wrought with bad luck from evil spirits.
Such practices have led to the belief that the market slows down during ghost month, as a significant amount of companies listed in the Philippine Stock Exchange (PSE) belong to businessmen with Chinese heritage. As such, stock prices tend to fall, which conversely presents an investment opportunity for those who follow the stock market day in and day out.
But can this be supported by historical data?
To find out, Entrepreneur Philippines took a look at the average daily price change of the PSE composite index (PSEI) during ghost month over the past 32 years, and compared these with the average daily price change of the entire year. We then got the difference of those two values. Refer to the first graph above to see how the data look like.
The data show that 62.5 percent of the time, the PSEI underperforms during ghost month relative to the entire year. In 20 of the 32 years analyzed, the average daily price change during ghost month was lower than the average figure for the year, which means that the PSEI’s price in ghost month dropped faster or rose slower relative to the year.
In the same vein, half of the 32 years analyzed produced a negative average daily change during ghost month, which means that stock prices tended to decline. In contrast, only nine years had a negative average daily change for the entire year.
While the declining prices may lead some to believe that ghost month is a good opportunity to buy stocks for guaranteed returns, the data show somewhat mixed results.
We took the average price of the PSEI during ghost month and compared that with the average price in each of the three months that followed. We then got the average change across all three months. Take a look at the second graph above to see how those values ended up.
The data show that investors who bought blue-chip stocks during ghost month would only see short-term returns half the time. For 16 of the 32 years, the PSEI actually had a lower average price in the three months after ghost month when compared to the supposedly “inauspicious” time of the year.
So while the PSEI tends to underperform during ghost month, it doesn’t necessarily mean that the stocks will reap short-term returns when bought within the period.
Lorenzo Kyle Subido is a staff writer of Entrepreneur PH