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Jewish Holidays and Stock Market Returns 2012 1
Jewish Holidays and Stock Market Returns 2012 1
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Jewish holidays
L’Chaim: Jewish holidays and and stock returns
stock market returns
Jamshid Mehran and Alex Meisami
School of Business and Economics, Indiana University South Bend, 641
South Bend, Indiana, USA, and
John R. Busenbark
Kelley School of Business, Indiana University, Bloomington, Indiana, USA
Abstract
Purpose – The purpose of this paper is to investigate the impact of Jewish holidays on US stock
market returns.
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1. Introduction
Holidays affect the mood, demeanor, attitude, and daily experience of individuals who
observe them. This is evidenced by the overall atmosphere and tidings associated with
holidays – whether religious, national, or cultural. Ariel (1990) and Sullivan et al.
(2001) find the US stock market experiences increased returns on holidays traditionally
observed by Americans. Abadir and Spierdijk (2011) found a positive relationship
between stock market returns and various festivities, whether religious or cultural.
This study investigates the impact of Jewish holidays on stock market returns.
While Jewish individuals comprise only 2 percent of the US population (US Census
Bureau), approximately 30 percent of the billionaires in the USA (Local News
Digest, 2010) are Jewish. Also, over 20 percent of individuals on the Forbes 400 Richest Managerial Finance
Vol. 38 No. 7, 2012
People list are Jewish (Forbes.com, 2010). Jewish individuals have 8.7 percent greater pp. 641-652
employment and approximately 100 percent greater median income than non-Jewish q Emerald Group Publishing Limited
0307-4358
households (Burstein, 2007). DOI 10.1108/03074351211233104
MF The motivation of this research is to determine if stock market returns are affected
38,7 by Jewish holidays, as it is interesting to see the impact these holidays have, provided
the relatively small number of individuals who observe them. It also seeks to determine
if the demeanor of each specific holiday has any relationship with the market returns
on that day. It is documented that investors’ moods do, in fact, have some impact on
returns. For instance, Hirshleifer and Shumway (2003) show that sunshine is
642 significantly correlated to stock market returns, and investors are subject to conscious
and subconscious decisions that influence investment decisions.
Another known factor to affect stock market returns is lunar phases. Yuan et al.
(2006) review lunar phases and stock market returns and show there is a decrease in
return of 3-5 percent on a seven day window around a full moon, as opposed to days
surrounding a new moon. This is important because many of the Jewish holidays
(or feasts) studied here begin on a full moon. The differences here are that some of the
Jewish holidays do not overlap with the full moon and this focuses more on one to
three-day average returns around the holiday, whereas Yuan et al. (2006) consider longer
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windows.
which is meant to be a functioning light, as the others are symbolic and not meant to be
used. It is part nationalist and part religious as it is a post-Biblical holiday. It commemorates
a miracle and winter solstice. Many non-observing Jewish people believe this is the most
significant Jewish holiday, and it is observed by a joyous celebration accompanied with a
gift exchange. Date range: typically anytime in December – 25 Kislev.
3. Literature review
Ariel (1990) and Sullivan et al. (2001) studied holiday-effects on stock market returns.
They find on the days immediately preceding an American holiday, the daily returns are
approximately 0.38 percent greater in an equal-weighted index and even greater in a
value-weighted index. Ariel concludes increased stock returns near American holidays
are caused neither by other events, such as the January-effect or weekend-effect nor by
market specialists.
Hirshleifer and Shumway (2003) studied investors’ mood through reviewing sunny
days – or days typically associated with good moods. By observing traders’ behavior,
they conclude that investors would have marginally benefited from trading on sunny
days. However, after controlling for other variables and including transaction costs,
their findings are somewhat inconclusive regarding the extent to which sunshine-based
trading is beneficial. Hirschliefer and Shumway (2003) provide evidence that investors
are subject to various conscious and subconscious mood biases when making
investment decisions. Yuan et al. (2006) studied lunar phases and stock market returns
and found that there is a decrease in return of 3-5 percent per annum on a seven day
window around a full moon, as opposed to days surrounding a new moon.
The Monday-effect (Keim and Stambaugh, 1984) shows decreased market returns on
Mondays and high positive correlation between returns on Friday and Monday, and this
may have an impact on stock market returns on Jewish holidays. The day-of-the-week
effect, where the authors document different returns associated with each day of the
week (Berument and Kiymaz, 2001), may also have an impact on stock market returns
on Jewish holidays. The negative returns associated with days near a full moon must
also be controlled (Yuan et al., 2006). These factors are all controlled in the regression
computations. The January-effect (Haug and Hirschey, 2006) is irrelevant here,
since none of the Jewish holidays in the sample occur in January.
MF 4. The purpose of this study and hypotheses
38,7 The purpose of this study was to analyze market returns to determine whether on
Jewish holidays investors have behaved in a pattern as such to consistently influence
average daily stock market returns. Inspired by the facts about Jewish individuals’
economic success, surveys, and existing literature that suggests the stock market is
affected by traditional holidays we test three hypotheses:
644 H1. Stock market returns are significantly influenced by Jewish holidays.
Each of the Jewish holidays conveys various emotions: some joyous and some solemn.
There are nine major Jewish holidays in each year. Purim, Passover, Sukkot, Shavuot,
Simkhat Tora, Shemini Asteret, and Khanukka are all joyous. Rosh Hashana is
somewhat neutral and Yom Kippur is solemn:
H2. Stock market returns are affected by investor sentiment: the mood of specific
Jewish holidays, as joyous or solemn, have a positive or negative effect on the
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stock market.
We also seek to determine who is influencing the stock market on Jewish holidays.
Because individual investors are more likely to react emotionally and invest
accordingly:
H3. Individual investors have a greater influence than institutional investors.
Ordinary least squares regression and the Fama-French four-factor model analyses are
used to determine if there is a relation between Jewish holidays and market returns.
Further, the day-of-the-week effect is controlled. Dummy variables are assigned to each
day of the week and to Jewish holidays. In the following regressions, JH represents the
dummy variable for Jewish holidays. Notations MON, TUES, WED, THUR represent
Monday, Tuesday, Wednesday, and Thursday. Each specific holiday’s dummy variable
MF Holiday 1990-2009 (%) 1990-1999 (%) 2000-2009 (%)
38,7
Purim 0.60 0.41 0.79
Passover 0.53 20.07 1.14
Shavuot 0.15 0.17 0.13
Rosh HaShana 0.35 20.07 0.76
Yom Kippur 20.23 0.16 20.61
646 Sukkot 0.74 20.33 1.80
Shem/Sim 0.19 0.02 0.37
Khanukka 0.14 0.14 0.13
Market average 0.01 0.05 20.03
Notes: This table shows the average daily return for each specific Jewish holiday and on non-Jewish
Table III. holidays; means are then taken from the average daily returns per each decade and the period as a
Specific holiday returns whole
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is notated by the first three letters of the holiday name (e.g. SUK for Sukkot). For each of
the dummy variables, a “0” is assigned if that day does not correspond with the
respective variable, and a “1” is assigned if it does. The daily stock market returns used
for this purpose are the natural log of the return (ln(P1/P0)). The models are as follows:
Model 1:
Rt ¼ a þ b0ð JH Þ
Model 2:
Rt ¼ a þ b0ð JH Þ þ b1ðJHxMON Þ þ b2ðJHxTUESÞ þ b3ðJHxWEDÞ
þ b4ð JHxTHURÞ
Model 3:
Rt ¼ a þ b0ðPURÞ þ b1ðPASÞ þ b2ðSHAÞ þ b3ðROSÞ þ b4ðYOM Þ þ b5ðSUKÞ
þ b6ðSIM Þ þ b7ðSHEÞ þ b8ðKHAÞ
In the above models, the daily returns constitute the dependant variable. In Model 4,
“x” is used to show the interaction between two dummy variables (Table IV).
In addition, more factors are investigated to help further determine if Jewish
holidays elicit an impact on stock market returns. The Carhart four-factor model is
utilized (derived from the Fama-French three factor model) to provide a more robust set
of data to further evidence a Jewish holiday effect. Each of the components included in
this model are leveraged as an individual factor, to be evaluated in three dimensions;
first as a total regression determining the a of the returns on Jewish holidays, second
by computing the overall returns associated with deciles related to the factor on Jewish,
and third by employing a regression to calculate the significance of the findings.
Results from deciles that are derived from each factor are computed. Each decile’s
portfolio is composed of stocks traded in US markets: NYSE, AMEX, and NASDAQ
and were obtained from CRSP. Decile 1 represents a portfolio of the largest market
capitalization stocks, lowest book-market ratio, or lowest momentum, while decile
10 represents the smallest size and largest book-to-market and momentum. The data
reported in Table V is the annual average of returns for the nine Jewish holidays,
per decile. Also, an OLS regression is employed using the following models to
Jewish holidays
Model 1 t-statistics Model 2 t-statistics Model 3 t-statistics
and stock returns
a 0.000 0.746 a 0.000 0.747 a 0.000 0.741
JH 0.002 * * * 3.116 JH 0.003 * 1.947 PUR 0.006 * * 2.186
JHxMON 2 0.000 2 0.296 PAS 0.005 * 1.953
JHxTUES 0.002 0.628 SHA 0.001 0.566
JHxWED 2 0.003 2 0.970 ROS 0.003 1.230 647
JHxTHUR 2 0.005 * 2 1.894 YOM 2 0.002 2 0.994
SUK 0.006 * * * 2.612
SIM 0.000 0.148
SHE 0.003 1.444
KHA 0.001 0.443
Notes: Significant at: *10, * *5, and * * *1 percent levels, respectively, using a two-tailed test; this
table reflects regression data based on dummy variables provided for each weekday and on the day of
a Jewish holiday; returns were calculated as (ln(P1/P0)) to account for normal distribution; the models Table IV.
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which feature the regression equation are ( JH represents the dummy variable for Jewish holidays, OLS regression of market
MON-THUR represents the dummy variable for each day of the week, and each specific holiday is return with weekday
notated by the first three letters in its name accordingly) dummy variables
1 0.08
2 0.11
3 0.12
4 0.16
5 0.19
6 0.20
7 0.23
8 0.24
9 0.29
10 0.32
Notes: This table consists of data based on stock capitalization; ten portfolios, based on size, are
constructed using data from US stock markets: NYSE, AMEX, and NASDAQ; returns for each of these
portfolios are computed and reported based on an annual daily average on Jewish holidays; individual Table V.
decile portfolios are created for each exchange group, the largest capitalization being in decile 1 and Stock returns on
the smallest capitalization in decile 10 Jewish holidays by decile
determine the significance of the returns on Jewish holidays for each decile in Table VI.
In this regression, JH represents the dummy variable for the Jewish holidays and it is
assigned a “0” if the day is not a Jewish holiday and a “1” if it is. For this paper, the
returns are defined as (ln(P1/P0)) for each decile.
The Fama-French four-factor model used is:
RJH 2 Rf ¼ a þ bðK m 2 Rf Þ þ bðSMBÞ þ bðHMLÞ þ bðUMDÞ þ 1
where:
RJH is the average daily market return, per annum, for the Jewish holidays.
Rf is the rate of return for a risk-free proxy.
MF
Decile bSMB ( JH) t-statistics bHML (JH) t-statistics bUMD (JH) t-statistics
38,7
1 0.039 0.555 0.208 * * 2.177 0.279 * 1.739
2 0.064 0.697 0.230 * * * 2.643 0.267 * * 2.107
3 0.072 0.757 0.245 * * * 2.916 0.273 * * * 2.589
4 0.123 1.321 0.258 * * * 2.910 0.275 * * * 2.844
648 5 0.141 1.491 0.288 * * * 3.247 0.301 * * * 3.291
6 0.157 * 1.806 0.273 * * * 3.214 0.249 * * * 2.929
7 0.190 * * 2.172 0.224 * * * 2.718 0.266 * * * 3.255
8 0.201 * * 2.236 0.293 * * * 3.128 0.251 * * * 3.084
9 0.245 * * * 2.803 0.250 * * * 2.800 0.247 * * * 2.857
10 0.282 * * * 3.211 0.308 * * * 3.101 0.221 * 1.942
Notes: Significance at: *10, * *5, and * * *1 percent levels, respectively, using a two-tailed test; this
table consists of data based on stock capitalization, book-to-market ratio, and momentum;
ten portfolios, based on size, ratio, and momentum are constructed using data from US stock markets:
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NYSE, AMEX, and NASDAQ; individual decile portfolios are created for each exchange group, the
largest capitalization, smallest book-to-market, and lowest momentum being in decile 1; the smallest
capitalization, largest book-to-market, and highest momentum are in decile 10; the following
Table VI. regression was then used for each portfolio: Rdt ¼ a þ b0( JH); JH is a dummy variable to identify
Jewish holiday effect whether the specific day is a Jewish holiday or non-Jewish holiday and returns were calculated as
and Fama-French factors (ln(P1/P0)) to account for normal distribution
Km 2 R f is the average daily rate of return, on the market, for all days minus
the risk-free rate.
SMB is the small minus big proxy (size effect).
HML is the high minus low proxy (book-to-market effect).
UMD is the momentum proxy.
In the regression, the dependent variable is the daily return for the S&P 500 on Jewish
holidays minus the risk-free rate on that day. The four independent variables,
extracted from the Kenneth French, are as follows:
(1) excess return on the value-weighted market portfolio (rate of return on the
value-weighted CRSP index minus the risk-free proxy);
(2) difference between the return of value-weighted portfolios of small and large
market capitalization firms’ stocks;
(3) difference in returns of valued-weighted portfolios of high and low
book-to-market firms’ stocks; and
(4) difference in returns of stocks with high past returns minus those with low past
returns (momentum).
The a is estimated y-intercept or is the abnormal return on Jewish holidays.
The decile regression models used are:
RSMH ¼ a þ b0ðJH Þ
RHML ¼ a þ b0ðJH Þ
RUMD ¼ a þ b0ðJH Þ
The return for each decile is the y-variable.
While there are four factors in the initial model, this section features regressions Jewish holidays
which utilize only three of the factors (SMH, HML, and UMD). The market returns and stock returns
represent the first of the four factors and are already calculated in the initial regression,
featured in Table IV.
during the market turmoil of 2008 and 2009, the market experienced much greater
returns on Jewish holidays than it did in any other year during the 20-year period.
Table II, then, shows average daily return for three windows (2 7 days, 2 1 day)
(2 3 days, þ 1) (2 1 day, þ 1 day). These are around Jewish holidays for the entire sample
as well as the two decade periods. None of the average returns in these window periods
result in even 20 percent of the average daily return on Jewish holidays. Even more
significant is the fact that the smallest window in Table II (2 1 day, þ 1 day) experiences
the greatest average daily return. This is because the influence of the Jewish holiday on
the return is the greatest on the average of this period, given the smallest number of days.
Accordingly, the largest window (2 7 days, 2 1 day) experiences the lowest average
daily return, as the impact of the Jewish holiday is excluded from that window.
The significance of Table II cannot be understated. Yuan et al. (2006) find the days
around a full moon have been found to experience lower returns. Provided that Jewish
holidays typically begin on a full moon, this indicates fairly different market behavior
for shorter windows around Jewish holidays. Here, positive market returns around
these days are observed.
Table III shows that on all holidays except one, the market experiences greater
returns than on non-holidays. Jewish holidays that perform especially well are the
holidays regarded as joyous days, such as Purim, Passover, and Sukkot. Conversely,
on Yom Kippur, a holiday with a solemn demeanor, the market underperforms and
experiences negative returns. This can possibly be a result of investors’ moods being a
factor affecting the returns on these given days.
Next, regression results are summarized in Table IV. In Model 1, JH alone is used as
the dependent variable. The coefficient is 0.002 and is significant at the 1 percent level.
Since the Monday-effect is vastly studied in previous literature, Model 2 includes a
Monday dummy (MON). The MON dummy takes a value of “1” on Mondays or “0”
otherwise. Also defined are similar dummy variables for the other days of the week.
These are used to control for the effect of other days of the week through interaction of
the Jewish holiday dummy and other day-of-the-week dummies. These are included to
ensure the significant relationship between Jewish holidays and stock market returns
is not a result of the Jewish holiday occurring on one specific day of the week. In the
first two models, the coefficient for JH dummy remains positive and significant at the
1 and 10 percent level, respectively. The coefficients of other days (except Thursday)
MF are insignificant. The fact that the coefficient of the Thursday dummy is negative
38,7 (significant at 10 percent) indicates that the main result (positive and significant impact
of Jewish holidays on stock market) is not driven by a “Thursday-effect”. Results from
Models 1 and 2 are consistent with the findings in Tables I-III and with H1.
Existing literature suggests that investors’ mood does affect market returns.
Hirshleifer and Shumway (2003) discuss this with a sunshine effect, and Yuan et al.
650 (2006) find lunar phases affect market returns. In Model 3, a dummy variable for each
of the nine Jewish holidays is assigned. Positive and significant coefficients for the
most joyous holidays, and a negative coefficient on the solemn holiday (Yom Kippur)
are observed. Overall, these results support H2, which states that the demeanor of the
holiday will influence stock market returns.
The Jewish holiday effect related to market capitalization is examined to further
substantiate if investors moods influence stock market returns on Jewish holidays.
Empirical findings suggest large capitalization stocks have a greater percentage of
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7. Conclusions
In this paper, we seek to answer to two main questions: first, do Jewish holidays have an
impact on stock market returns? Second, if so, does a joyous holiday have a different
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impact on the market returns than a solemn holiday? Third, do individual investors have
a greater impact on market returns than institutional investors (another substantiate of
investor sentiment)?
We find that there is a significantly positive relationship between Jewish holidays
and stock market returns, which is mostly associated with joyous holidays: on all of the
joyous Jewish holidays studied, the market experiences greater returns than on
non-Jewish holidays while on the solemn holiday of Yom Kippur the market experiences
negative, but statically insignificant returns. Apparently, investors behave in ways that
reflect their mood on Jewish holidays.
Using the Fama-French four-factor model, we also determine that this Jewish
holiday effect is significant throughout a broad market spectrum, impacting all stocks
regardless of book-to-market or momentum. More, the excess return on the Jewish
holidays was statistically significant and similar results for the exact increased return
were found using OLS regression methods.
The returns on Jewish holidays mainly influence small windowed periods, around
the holiday, as opposed to larger windows. Our results are similar to previous research
stating that days around a full moon experience negative returns (Yuan et al., 2006), as
that is true of the days surrounding, but not including, the Jewish holiday. On the
holiday itself, returns were much greater.
a 0.626 * * * 0.000
KM-Rf 25.233 * * * 0.003
SMB 0.634 0.789
HML 23.766 * * 0.060
UMD 25.600 * * * 0.001
Notes: Significant at: *10, * *5, and * * *1 percent levels, respectively, using a two-tailed test; this
table reflects statistics from the Carhart (Fama-French) four-factor model regression; returns were Table VII.
calculated as (ln(P1/P0)) to account for normal distribution; the data for the all of the factors were Four-factor model
abstracted from the Kenneth French database regression statistics
MF References
38,7 Ariel, R.A. (1990), “High stock returns before holidays: existence and evidence of possible
causes”, Journal of Finance, Vol. 45 No. 5, pp. 1611-26.
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Carhart, M.M. (1997), “On persistence in mutual fund performance”, Journal of Finance, Vol. 52
No. 1, pp. 57-82.
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Journal of Financial Economics, Vol. 33 No. 1, pp. 3-56.
Loughran, T. and Wellman, J.W. (2011), “New evidence on the relation between the enterprise
multiple and average stock returns”, Journal of Financial and Quantitative Analysis, Vol. 46
No. 6, pp. 1629-50.
MacKinlay, C.A. (1997), “Event studies in economics and finance”, Journal of Economic
Literature, Vol. 35 No. 1, pp. 13-39.