Lunar cycle effect and its relation with calender anomalies :: Evidence of stock returns at Jakarta Stock Exchange

RAJA, Robby Setiady, Prof.Dr. Abdul Halim, MBA

2004 | Tesis | Magister Manajemen

Many studies in the field of investments have departed from the basic assumption that investors are fully rational to the assumption that investors’ irrationality affects capital markets. Psychological hypothesis has been the underlying foundation for studies regarding investors’ irrationality. Many anomalies have been found in this type of study. Some studies have linked the relationship of astrological phenomena to investors’ mood. One of the astrological phenomena is lunar cycle effect. This study investigates the link between lunar cycle and stock returns since lunar cycle is believed to affect human behavior. More specifically, full moon is believed to cause deviant human behavior. It is postulated that stock returns on days around the full moon are lower than on days around the new moon. This study also investigates the influence of calendar-related anomalies such as January effect and Monday effect on lunar cycle effect. This study employs regression analysis to examine the existence of lunar cycle effect and its relation with January effect and Monday effect. Findings of this study indicate that lunar cycle effect statistically affects stock returns at Jakarta Stock Exchange during the period of investigation. The findings also indicate that the lunar cycle effect is not affected by January effect and Monday effect.

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