Is there such a thing as the “pre-holiday effect?”

Is there such a thing as the “pre-holiday effect?”

Pre-Holiday price fluctuations have been observed in many instances, but there a difference of opinion as to whether the markets are higher or lower just before holiday.

Pre-Holiday Seasonality is the idea that prices will rise or fall before a holiday weekend in which the market will be closed for a day.

When researching this phenomenon you may find colloquial wisdom stating that prices always rise before a holiday, but in actuality most of the evidence points the opposite direction: prices are most likely to close lower the day or two before a holiday weekend, and may remain low the day after the holiday, but this provides a possible opportunity to ride the upswing.

An investor has a somewhat higher probability of success buying low about two days before a holiday and selling higher two days after the holiday.

The probability of this working out in your favor is still not incredibly high, and there may be stipulations depending on whether the present market is more bearish or bullish which haven’t been vetted out yet.

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