The Moon: It cannot dictate your investment decisions

When it comes to buying stocks, people have various formulae they swear by.

Some of their deduction practices even bother on being incredulous.

So when someone tells you he makes his money off the stock market by looking at the moon, you'd probably think he's kidding.

But according to a Straits Times article published yesterday, US academics who took a close look at this “lunar cycle” theory in relation to stocks found investors do get better returns at certain times of the lunar month.

They conducted two studies which found the differences in returns can be up to 10% a year, on average.

These studies were highlighted in a November article in the Harvard Business Review and reported by the New York Times.

Now surely there must be some substantiality to this.

One of the studies, conducted by the University of Michigan, said this effect is more likely to occur outside the US.

The other study, by the University of California, said this “appears strongest for small-cap stocks”.

This may be so because of the demographics of those who track small-caps.

Bigger investors in blue-chips tend to be immune to such.

The reports note investors get higher returns “during the 15 days of the lunar month closest to the new moon”.

“If it is true that you can grow your money just by following lunar cycles, everyone will be very rich,” CIMB-GK research head Song Seng Woon told the Straits Times.

Even if this lunar cycle thing works, it is a hard thing to study for the uninitiated.

Questions like these will come up:

1)Do we have to discount public holidays and the festive seasons to work out 15 days worth of “make money” trading sessions?

2)When it comes to investing/trading, would my mood really play a part? (Since the phases of the moon apparently affects our behaviour and mood.)

Yes, if it were really that easy, I'd be rolling in the cash right about now.

And, if the lunar cycle theory were true, you have between 13 Dec and 27 Dec this year to work on your portfolio.

In the new year, the “hot period” would be between 12 Jan and 26 Jan.

But do remember it's Christmas in between, and come late January, we'll be approaching the Chinese New Year.

Another tip stemming from lunar-cy:

One dealer noted the current year of the Fire Dog saw a revival in China plays and record highs by the Straits Times Index.

He expects the market to rally further and sectors like property, hotel and high-tech industries to come into play in the new year of the Fire Pig.

Now, just remember to consult your nearest licensed financial analyst before you make any investment decisions.

Serene Lim