{"id":1816704,"date":"2019-03-13T07:19:08","date_gmt":"2019-03-13T06:19:08","guid":{"rendered":"https:\/\/www.newzyexecutive.fr\/psychology-and-stock-market-behavior\/"},"modified":"2026-05-05T08:44:02","modified_gmt":"2026-05-05T07:44:02","slug":"psychology-and-stock-market-behavior","status":"publish","type":"post","link":"https:\/\/www.newzyexecutive.fr\/en\/psychology-and-stock-market-behavior\/","title":{"rendered":"Psychology and Stock Market Behavior"},"content":{"rendered":"

This article follows the two previous pieces on psychology in financial markets, written by Marion Lagr\u00e9e.<\/strong><\/p>\n

How external events influence market behavior<\/h2>\n

(…) In addition to these psychological behaviors, external events also influence the actions of retail investors and, consequently, market behavior.<\/p>\n

Indeed, the\u00a0elections<\/strong>\u00a0presidential and the\u00a0JO<\/strong>\u00a0influence stock market trends.\u00a0Why?<\/em><\/p>\n

A study conducted by\u00a0Journal of Empirical Finance<\/em>\u00a0analyzed traders’ behavior following their football teams’ losses, particularly when their odds among bettors are high. They found that, depressed by the defeat, traders are more likely to sell rather than buy at the market opening the following day\u2014generally on Monday. Consequently, stock market behavior could be correlated with sporting results! Another study shows that if a country’s team loses during an international competition, its local market tends to underperform the next day. External events therefore influence investor psychology and, ultimately, stock market behavior.<\/p>\n

Calendar influences or\u00a0weather-related<\/strong>\u00a0also have an impact. A study conducted by EM. Saunders shows that sunshine levels influence stock market behavior. Indeed, on “very” sunny days, the impact on market performance is positive. The effect\u00a0weekend<\/strong>\u00a0joining the study on market weather, K.R. French demonstrated in 1980 that investors tend to buy more toward the end of the week as the weekend approaches and spirits are high. Conversely, Mondays are historically bearish, as investors tend to be more pessimistic.<\/p>\n

As for the effects\u00a0seasonal workers<\/strong>\u00a0regarding the stock market, the best months of the year to hold equities range from November to April, while the worst-performing months for stocks are from May to October. According to the Wall Street adage:\u00a0\u2018\u2019Sell in May, then go away\u2019\u2019<\/em>. The reasons remain unclear, but the facts are real.<\/p>\n

However, the most enigmatic cyclical phenomenon in financial market behavior is “the January effect<\/strong>\u2019\u2019. This is the month when stocks achieve their highest gains, particularly for small-cap equities. According to some researchers, institutional and individual investors sell off depreciated assets for tax purposes, as they can claim a tax credit. These shares are then quickly repurchased at low prices during January, driving their share prices up. Two other factors explain the “January effect.” The first relates to the influx of liquidity for many small investors in the form of dividends or year-end bonuses, which boosts demand. The second involves offloading underperforming stocks at year-end to ensure annual reports reflect only successful investments. The funds received at the end of the year are then reinvested in January, further increasing demand.<\/p>\n

\u2018\u2019The September Effect<\/strong>\u2019\u2019 Conversely, according to J. Siegel, [Month] is the only month of the year that has yielded a negative cumulative return, followed closely by October, a trend that has persisted for 100 years. These months hold the records for market corrections and stock market crashes. According to Siegel, the only explanation is the liquidity needs individuals face to fund their summer vacations.<\/p>\n

As for JF. Richard, a financial journalist, he writes that the\u00a0moon phases<\/strong>\u00a0reverse the previous market trend in 75% of cases. The stock market tends to rise during the new moon and lean bearish during the full moon. However, according to a 100-year study, the correlation between the lunar cycle and stock performance has a probability of only 1 in 3 million.<\/p>\n

Finally, some investors exhibit behaviors\u00a0countercyclical<\/strong>, meaning they buy when everyone else is selling and sell when everyone else is buying. (“With results that are sometimes highly compelling\u2019\u2019\u00a0<\/em>as stated by JP. Bruel, professor of:\u00a0Stock and Financial Markets.<\/em>)Please provide the French text you would like me to translate. Currently, the “TEXTE FRAN\u00c7AIS \u00c0 TRADUIRE” field is empty.<\/p>\n

Conclusion of the feature on stock market psychology and behavior<\/h2>\n

In conclusion,<\/p>\n

\n

FINANCIAL MARKETS ARE NOT GOVERNED BY REASON, BUT BY THE PSYCHOLOGY OF THE CROWD. IN FACT, MARKETS ARE ONLY EPISODICALLY RATIONAL.<\/p>\n<\/blockquote>\n

Furthermore, greed generally leads to extremely irrational market behavior.<\/p>\n

*Warren Buffett’s advice is as follows:*<\/em><\/p>\n

\n

“BE GREEDY WHEN THE MARKET IS FEARFUL, AND BE FEARFUL WHEN THE<\/p>\n

“THE MARKET IS HUNGRY.” (COUNTER-CYCLICAL).<\/p>\n<\/blockquote>\n","protected":false},"excerpt":{"rendered":"

This article follows the two previous pieces on psychology in financial markets, written by Marion Lagr\u00e9e.<\/p>\n","protected":false},"author":1,"featured_media":1774,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[230],"tags":[],"class_list":["post-1816704","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/www.newzyexecutive.fr\/en\/wp-json\/wp\/v2\/posts\/1816704","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newzyexecutive.fr\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newzyexecutive.fr\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newzyexecutive.fr\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newzyexecutive.fr\/en\/wp-json\/wp\/v2\/comments?post=1816704"}],"version-history":[{"count":1,"href":"https:\/\/www.newzyexecutive.fr\/en\/wp-json\/wp\/v2\/posts\/1816704\/revisions"}],"predecessor-version":[{"id":1816708,"href":"https:\/\/www.newzyexecutive.fr\/en\/wp-json\/wp\/v2\/posts\/1816704\/revisions\/1816708"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newzyexecutive.fr\/en\/wp-json\/wp\/v2\/media\/1774"}],"wp:attachment":[{"href":"https:\/\/www.newzyexecutive.fr\/en\/wp-json\/wp\/v2\/media?parent=1816704"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newzyexecutive.fr\/en\/wp-json\/wp\/v2\/categories?post=1816704"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newzyexecutive.fr\/en\/wp-json\/wp\/v2\/tags?post=1816704"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}