What is the October effect?
October effect is the theory that is based on understanding that serious side effects on the stock market are likely to take place during October of the calendar month. There are investors and financial experts who have this theory very closely, sometimes to the extent that they accept further warranties to protect their portfolios throughout the month. Others feel that the October effect is a superstition rather than a well -documented recurring phenomenon on the market and tends to do little in the way of special preparation.
For those who find some validity in the concept of the October effect, the theory is usually presented by examples of catastrophic events that influenced the stock market during the month of October. This includes events in 1929, when the stock market accident has prepared a way for what is called great depression. During October, business days that became known as Black Monday, Black Tuesday and Black Thursday took place. The sudden 1987 accident took place during October and is quoted as evidence,that there is something in the October effect.
Investors and others who do not cover any special emphasis on the October effect, often notice that while there have been a serious decline in the stock market during October, this phenomenon is by no means limited to a single calendar month. Examples as a panic from 1837, the accident that occurred in the United States began during May. Black Friday was a crash that occurred on Friday in May 1869. Over time, the main financial events on the market were virtually every month of the calendar year.
The main impact of the October effect is that some investors will become somewhat cautious during this time of year. There is one thought school that holds thje special caution does not help to divert the disaster, but prepares the ground for desperate circumstances to appear, essentially means that if there is a financial crisis, it is basically self -realizing proroof the income. Others note that events that cause a financial crisis will launch an event that can begin for months or even years in a major accident, effectively causing the designation of any month to be more dangerous than others to be more myth than reality.