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From the most ancient times, the astrological beliefs have played an important role in human history, thinking, world-views, language and other elements of social culture. The practice of relating the movement of celestial bodies to events in financial markets is relatively newer but despite the inconsistency between financial astrology and standard economic or financial theory, it seems to be largely spread among capital market traders. This paper evaluates one of the astrological effects on the capital market, more precisely the Mercury retrograde effect on US capital market. Despite the fact that it is just an optical illusion the astrological tradition says that Mercury retrograde periods are characterized by confusion and miscommunications. The trades could be less effective, the individuals more prone to make mistakes so there is a long-held belief that it is better to avoid set plans during Mercury retrograde, signing contracts, starting new ventures or open new stock market positions. The main findings of this study are lower return’s volatilities in the Mercury retrograde periods, inconsistent with the astrologic theories assumptions but consistent with the idea that trader’s beliefs in Mercury retrograde effect could change the market volatility exactly in the opposite sense than the predicted one.
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Timisoara Journal of Economics and Business | ISSN: 2286-0991 | www.tjeb.ro
Year 2016 | Volume 9 | Issue 1 | Pages: 49–61
MERCURY RETROGRADE EFFECT IN CAPITAL MARKETS:
TRUTH OR ILLUSION?
Aurora MURGEA 1
DOI: 10.1515/tjeb-2016-0004
From the most ancient times, the astrological beliefs have
played an important role in human history, thinking,
world-views, language and other elements of social
culture. The practice of relating the movement of celestial
bodies to events in financial markets is relatively newer
but despite the inconsistency between financial astrology
and standard economic or financial theory, it seems to be
largely spread among capital market traders. This paper
evaluates one of the astrological effects on the capital
market, more precisely the Mercury retrograde effect on
US capital market. Despite the fact that it is just an optical
illusion the astrological tradition says that Mercury
retrograde periods are characterized by confusion and
miscommunications. The trades could be less effective,
the individuals more prone to make mistakes so there is a
long-held belief that it is better to avoid set plans during
Mercury retrograde, signing contracts, starting new
ventures or open new stock market positions. The main
findings of this study are lower return’s volatilities in the
Mercury retrograde periods, inconsistent with the
astrologic theories assumptions but consistent with the
idea that trader’s beliefs in Mercury retrograde effect
could change the market volatility exactly in the opposite
sense than the predicted one.
Keywords:
B
e
eliefs, B
e
ehavior,
M
Mercury retrograde,
R
Returns,
V
Volatility
.
JEL Classification:
G02, G10, D53.
1
Associate Professor, Department of Finance, Faculty of Economics and Business Administration, West University
of Timisoara, Romania.
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Murgea A. (2016).
Mercury retrograde effect in capital markets: truth or illusion?
Timisoara Journal of Economics and Business | ISSN: 2286-0991 | www.tjeb.ro
Year 2016 | Volume 9 | Issue 1 | Pages: 49–61
50
1. Celestial Bodies, Mood and Decision
Science or pseudo-science as its critics are denoting it, astrology has very deep roots in the
history of mankind. Among the first things a child says there is a question: “why?” (why does the
sun shine, why there is night and day, why we are so different, why we express our feelings so
diversely, why do things happen even when one cannot see a reason for them...?) Probably one
of the reasons why the astrology has played such an important role in history is because it
attempts to bring answers to these questions and more than that it provides a set of forecasting
techniques and tools people have always desired1
The important question that arises is: what is the channel used to influence human decision?
Psychological and medical studies have linked the celestial bodies’ position and evolution stage
to decision using the mood channel and the biorhythm
.
2
Mood and potential changes of mood seem to influence decision making and securities prices
both through cognitive-evaluation and risk-tolerance.
as a mood determinant.
Good mood increases the ability of categorization, creativity in response-generation tasks and
efficiency in solving multi-attribute decision problems (Pham, 2007) but individuals in positive
mood tend to rely on stereotypes and judgmental heuristics and have a higher propensity to
optimism and overconfidence biases (Hoffrage, 2004). A negative mood seems to produce
different effects depending on its cause. For instance, sadness decreases the use of scripts and
stereotypes and triggers a more systematic, data-driven form of reasoning since sad moods
represent a signal for the individual that a more vigilant form of processing is required (Schwarz,
2002). Anger and disgust lead to heuristic rather than systematic processing (Triedens & Linton,
2001).
1 Its beginnings are associated with the first attempts to measure, record and predict seasonal changes by reference to
astronomical cycles, made by human beings Burckhardt (1969). Babylonian astrology was the first organised system of
astrology, dated in the 2nd millennium BC even if there are some isolated references regarding other similar forms that appeared
in the Sumerian period in 3rd millennium BC (Holden, 1996). The astrology evolution as a science was not smooth at all. Despite
the fact that until the 17th century, astrology was considered a scholarly tradition, commonly accepted in political and cultural
circles, meteorology and medicine, by the end of 17th century due to the advances in astronomy, it lost its academic standing
(Barton, 1994). If until the 17th century astrology was widely recognized, nowadays people are more afraid of mockery and
pretend not to believe in it. Still, the number of the ones who admit that astrology plays an important role in their life and
decision is not that small: Pew Research Center (2009) determine, based on a survey study, that more than 25% from Americans
believe in astrology.
2 The idea of different biorhythm cycles that influence human behaviour can be traced back to the German surgeon Wilhelm Fliess
in the 1890s who proposed a 23-day male period and a 28-day female period (in Hines, 1988).
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Murgea A. (2016).
Mercury retrograde effect in capital markets: truth or illusion?
Timisoara Journal of Economics and Business | ISSN: 2286-0991 | www.tjeb.ro
Year 2016 | Volume 9 | Issue 1 | Pages: 49–61
51
The link between mood and risk taking it is still a controversial topic due to the quite opposite
theories from the literature: Mood Maintenance Hypothesis (MMH) proposed by Isen, Nygren,&
Ashby (1988) and Affect Diffusion Model (AIM) proposed by Forgas (1995).
The MMH model starts from the idea that the main goal of any individual is to achieve and
maintain a state of well-being. If the individual experiences a good mood state, he will avoid
risky situations in order to preserve the good state. In the case of a bad mood situation, the
individual will choose riskier alternatives hoping that the possible gains will lift his spirit. The
effect of human sentiment on the decision making process is also analyzed by Forgas (1995)
but the direction of the supposed effect is opposite. The AIM model suggests instead that
subjects in bad mood have a more pessimistic view of the world, perceive situations as riskier,
and have, as a result, a lower propensity toward risk taking. On the other hand, individuals in a
positive affective state, who usually have a more optimistic view and perceive a safer
environment, should be more prone to risk taking.
One could think that those two theories cannot be both true, but in fact they can. Individuals are
pretty different; hence, the impact of changes of mood may have heterogeneous effects on the
risk taking attitude. The relation between mood and risk taking is influenced by several factors
such as gender, age, genetic heritage, functioning of the endocrine system and personality traits
(for more details see Murgea, 2014).
Among mood determinants, biorhythm seems to play a pretty important role. Recent studies
identified three different biorhythm cycles: a 23-day cycle influences physical aspects such as
energy, resistance to disease, endurance; a 28-day cycle influences emotions such as sadness,
elation, moodiness, creativity and a 33-day cycle influences intellectual functions such as
alertness, memory and reasoning ability.
Great attention has been paid to what influence human biorhythm. Among those, the sun, the
lunar cycle and the position of other planets have been proved to be among the main factors. As
a direct result our biological balances are influenced, the adaptation mechanisms are impaired
and the appearance of different mood disorders, especially depression and anxiety, is facilitated
affecting also the decision mechanism.
In this framework, the present paper aim is to assess the influence of planet Mercury the
smallest and closest to the Sun, on the American capital market. The topic may seem peculiar
the first sight since from our knowledge there is no scientific literature, neither psychological nor
medical, neither financial to connect the Mercury retrograde with mood or capital market
evolution. Despite that, there is a huge tendency among traders to considerate that in the
periods when Mercury is retrograde they should avoid important decisions due to a higher
market volatility and instability. Considering this, the aim of the paper is to see if there is a
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Murgea A. (2016).
Mercury retrograde effect in capital markets: truth or illusion?
Timisoara Journal of Economics and Business | ISSN: 2286-0991 | www.tjeb.ro
Year 2016 | Volume 9 | Issue 1 | Pages: 49–61
52
connection between Mercury retrograde and American markets returns and, if there is
something like this how one can explain it.
The paper is structured as follows: the second section explains the use of financial astrology in
capital markets, presents the former studies that connect the celestial bodies evolutions with
the capital markets evolutions and offers some astrological explanations regarding the Mercury
retrograde, the third section is dedicated to the data, methodology and result, the fourth section
discusses the results and concludes.
2. Financial Astrology, Behavioral Finance and Capital Market Evolutions
2.1. Financial astrology and trading activities
The use of astrology in capital market analysis is both complex and controversial. It’s a proven
fact that the sun, the moon, and other heavenly bodies affect the amount of serotonin in your
brain and further the mood. According to Bonner & Rajiva (2007) this makes astrology a
potential useful tool for predicting stock market trends.
The first attempt to use financial astrology belongs to a well-known trader in 1950s, W. D. Gann,
who used a strategy based on the Jupiter-Saturn cycle, to facilitate his trading activities. He
considered that since Jupiter and Saturn are the biggest planets in our solar system, they have
one of the strongest influences when they are in line. The gravitational pull created determines
the Sun to shift periodically. This shift generates weather changes, mood changes and in the
final fluctuations in securities prices (Colby, 2003).
Nowadays, since astrology is no longer considered a science, the interest in the subject has
moved from the academia to technical analysts, but the interest is in some of the cases kept
secret3
3 Large firms as J.P. Morgan refuse to make comments regarding this practice but the founder, John Pierpont Morgan has personal
astrologer. Also his remark on this topic remains famous: "Millionaires don't use astrologers, but billionaires do” in Kleinfield,
1988.
, because of the fear of mockery. The most prominent technical analysts who use
astrology in their trading strategies are Arch Crawford and Bill Meridian. Arch Crawford has been
named “Wall Street’s best known astrologer” by Barron’s Financial Weekly being famous both
for calling the Crash of ’87 months in advance and for the correct prediction of the bear markets
in July 1990 and March 2000 (Colby, 2003). Bill Meridian is a very well-known researcher, fund
manager, and designer of analytical software able to compute correlations between time series
data and planetary cycles (Lo & Hasanhodzic, 2011). Lately, further literature makes the
connection between the movement of planets and the market volatility and lays out the
principles that allow the trader to properly use the tools of financial astrology (a very good
example in this sense is Pasavento & Smoleny, 2015).
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Murgea A. (2016).
Mercury retrograde effect in capital markets: truth or illusion?
Timisoara Journal of Economics and Business | ISSN: 2286-0991 | www.tjeb.ro
Year 2016 | Volume 9 | Issue 1 | Pages: 49–61
53
Financial astrology uses different instruments and tools to forecast capital markets cycles
according with the celestial bodies’ cycles. One of the most known cycles among the astro-
traders is the one of the retrograde Mercury. Three times per year, as seen from the Earth,
Mercury appears to slow down in its progress through the zodiac, stop and move backward
(retrograde). Despite the fact that it is just an optical illusion the astrological tradition says that
Mercury retrograde periods are characterized by confusion and miscommunications. The trades
could be less effective, the individuals are more prone to make mistakes so there is a long-held
belief that it is better to avoid set plans during Mercury retrograde, signing contracts, forming
partnerships, starting new ventures or open new stock market positions. While some astro-
traders prefer to step aside from active trading and avoid the markets altogether while Mercury
is retrograde some others prefer to try to use it for Mercury retrograde based strategies since in
many cases Mercury retrograde periods coincide with trend reversals or with short-term counter-
trends in the context of broader market moves (a very good example in this sense could be
depicted from Bost, 2012).
2.2. The moon, the sun and capital market returns
During the last decades several behavioral finance studies have tried to prove the presence of a
connection between moon cycles, sun and evolution and capital markets.
The belief that the moon exerts an influence on human behavior is widespread both among
specialists and the general public, in spite of the little empirical evidence from psychology and
medicine. Vance (1995) reported that 81% of mental health professionals believe that full moon
alters individual behavior. Out of the eight moon phases observed by Galileo Galilei both
superstitious beliefs and academic studies take into consideration only two: full moon and new
moon. Due to the extra-light the full moon produces, the quantity and quality of sleep is prone to
decrease. This leads to various behavioral changes, including mania through sleep deprivation.
Conforming to Hippocrates’s view that” no physician should be entrusted with the treatment of
disease who was ignorant of the science of astronomy” (White, 1914), several studies claim
that moon alters human behavior and increases the propensity for violence, suicides, accidents
and aggression (Thakur et al., 1987; Hicks et al., 1992). On the other hand, no influence of the
moon phases was found in any of the following studies, investigating the frequency of calls
reporting disturbing behavior (Byrnes & Kelly, 1992), suicidal tendency (Mathew et al., 1991;
Martin et al., 1992), hospital admission due to mental health emergencies and antisocial
behavior (Adamou, 2001), increase in incidence and severity of traumatic injuries (Coates et
al., 1989), madness (Iosif & Ballon, 2012).
Based on these findings, several researchers attempted to find a connection between fool moon
and capital markets. Dichev & Janes (2003) observe lower returns around the full moon due to
the heightened risk-aversion and more pessimistic prospects of future cash-flows, in US market
and 24 other countries over a 30-year period. The findings by Dichev & Janes (2003) are
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Murgea A. (2016).
Mercury retrograde effect in capital markets: truth or illusion?
Timisoara Journal of Economics and Business | ISSN: 2286-0991 | www.tjeb.ro
Year 2016 | Volume 9 | Issue 1 | Pages: 49–61
54
basically confirmed in Yuan et al. (2006), Nissim et al. (2012). Yuan et al. (2006) state that
lunar effect is independent of announcements of macroeconomic indicators, global shocks or
other calendar related anomalies, but that it is stronger for emerging economies.
By contrary, Gerlach (2007) finds a lunar pattern in the US market, with higher returns
associated with full moon days, mainly due to the announcement days. The same correlation
line is found by Liu (2009), who shows that for most of his sample of emergent Asian economies
the full moon effect determines not lower but higher returns, whereas they are inversely related
to company size in the US case.
The sun effect can be seen in several studies but the connection with capital markets is less
direct than the one with the moon. The sunshine effect, the impact of geomagnetic storms (a
geomagnetic storm consists in a temporary disturbance of the Earth’s magnetosphere
determined by an interaction between a strong solar wind shock wave and the Earth’s magnetic
field) and Seasonal Affective Disorder (Photoperiod (the number of hours of daylight is
connected with the seasonal affective disorder - SAD, a subtype of depression characterized by
changes in mood, energy, sleep, eating habits and social activities at the change of season) are
just several lines of analysis for this effect.
The sunshine effect on mood is widely discussed (Cunningham, 1979; Persinger & Levesque,
1983; Parrott & Sabini, 1990). Denissen et al. (2008) find a significant negative effect of
temperature, wind power and sunlight on mood. The main explanation offered for the negative
effect of sunlight may be due to the role vitamin D3 (produced when the skin is exposed to
sunlight) plays in changing the serotonin level in the brain (Lambert et al., 2002).
Krivelyova & Robotti (2003) analyzed the impact of geomagnetic storms on stock market
returns in nine countries, channeled by depression and anxiety. The main results have pointed
out that, especially in the small capitalization stocks, geomagnetic storms seem to have a
profound effect on risk aversion and indirectly to equity returns. The same results regarding the
impact of geomagnetic storms on risk were confirmed by Dowling & Lucey (2008b) on an
extended sample of 37 countries.
Finance researchers have tried to establish a relation between the number of hours of daylight
and equity returns based on psychological evidences. Through the link between SAD and
depression and between depression and lowered risk aversion, Kamstra et al. (2003) find that
seasonal depression, in a nine countries sample, is strongly linked to seasonal variations in
stock returns. Dowling & Lucey (2005) found a correlation, between Irish equity returns and SAD
but only between the Winter Solstice and the Spring Equinox. Testing SAD effect on the UK stock
market Dowling & Lucey (2008a), have found evidences of a SAD effect for the UK Small Index
and in the opposite direction for the UK Main Index.
In another study realized on a sample of 37
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Murgea A. (2016).
Mercury retrograde effect in capital markets: truth or illusion?
Timisoara Journal of Economics and Business | ISSN: 2286-0991 | www.tjeb.ro
Year 2016 | Volume 9 | Issue 1 | Pages: 49–61
55
countries, a SAD effect for small caps is also found (Dowling & Lucey, 2008b) but the effect is
more pronounced for countries which are farther away from the equator.
Considering financial astrology practice on the one side and the consistent body of behavioral
finance literature regarding moon and sun effect on the other side, we decided to test the
presence of abnormal returns in US capital market during the Mercury retrograde periods and to
see if the traditional astrologic explanation could fit the empirical results.
3. Data, Methodology and Results
To investigate the presence of abnormal differences in returns in the Mercury retrograde
periods we have chosen two of the most important indices on American stock market: DJIA and
S&P 500, on a period that range between 1st of February 1993 to 31st
The market has been chosen considering two very important factors. On the one side, USA
capital market is one of the most efficient capital markets and in theory this kind of calendar
effect should be less present but, on the other side, the financial astrology field is more
developed here than in any other part of the world. Those two arguments make USA a very good
case for our study.
December 2012.
The closing prices were computed in daily returns and tested for stationarity with Augmented
Dickey-Fuller, Elliott-Rothenberg-Stock DF-GLS and Phillips-Perron test. The results show that
none of them have unit roots (tests results available at request).
As a proxy for Mercury retrograde effect we have chosen, according with previous behavioral
finance studies that analyzed other celestial bodies influence in capital markets, to use dummy
variables computed as follows:
1 for the Mercury retrogrades days
0 for the other days
The main hypothesis we intend to test could be formulated as follows:
H1: The mercury retrograde periods are indeed characterized by higher market volatility and as a
consequence the traders should adapt their strategies according to their willingness to bear
this extra risk for a potential supplementary return
or
H2: The mercury retrograde periods are characterized by lower market volatility as a consequence
of the trader beliefs in mercury retrograde and their market avoidance during those periods.
DMR
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Murgea A. (2016).
Mercury retrograde effect in capital markets: truth or illusion?
Timisoara Journal of Economics and Business | ISSN: 2286-0991 | www.tjeb.ro
Year 2016 | Volume 9 | Issue 1 | Pages: 49–61
56
The main assumption of the proposed model is that the current difference in return depends both
on the previous return but also on the past differences because the investors are usually tempted
to perceive high volatilities as a sign of an enhanced risk. Their attitude in front of this perception
will be translated in further trades which will in the final increase the gap of returns. Thus, the
proposed model considers the dynamic character of return series and has the following
specifications:
tttn
m
n
nttn
DMRIndexDRRIndexcIndexDR
HJDE
¦
2
1
(1)
where:
c = constant
RIndext = (index closing price t-index closing price t-1 )/ index closing price
DR
t-1
nIndext = RIndext – RIndex
DMR
t-n
t
ơƠ
= dummy variable for Mercury retrograde
J
= importance coeficients
t
H
= standard error
For the two indices the formulas, using the same algorithm, become:
tttn
m
n
tt
DMRDJIADRRDJIAcDJIADR
HJDE
¦
2
11
(2)
and
tttn
m
n
tt
DMRIndexDRRScPSDR
HJDE
¦
2
11
500_
(3)
where RDJIA and RS_P500 stand for the daily return of DJIA and daily return of S&P500.
Testing the following benchmark, we noticed that the former five differences in returns are
significant for the present differences in return. The quality of the model increases when more
past differences are introduced (from model 1 to model 4) as one could see in the next two
tables because the present volatility is better explained by a longer volatilities history.
Table 1. Regression results for DJIA
Variables
Coefficients
Model 1 Model 2 Model 3 Model 4
C
0.000364***
(0.000125)
0.000376***
(0.000102)
0.000374***
(0.000008)
0.000367***
(0.000007)
RDJIA(-1) -1.058996***
(0.009733)
-1.054544***
(0.007899)
-1.034967***
(0.006716)
-1.028729***
(0.005907)
DMR -0.000387
(0.000280)
-0.000451**
(0.000227)
-0.000465**
(0.000193)
-0.000438***
(0.000169)
D2RDJIA 0.499994***
(0.006733)
0.349084***
(0.006214)
0.263288***
(0.005618)
0.200492***
(0.005205)
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Murgea A. (2016).
Mercury retrograde effect in capital markets: truth or illusion?
Timisoara Journal of Economics and Business | ISSN: 2286-0991 | www.tjeb.ro
Year 2016 | Volume 9 | Issue 1 | Pages: 49–61
57
Variables
Coefficients
Model 1 Model 2 Model 3 Model 4
D3RDJIA
0.327584***
(0.006428)
0.251032***
(0.005721)
0.203464***
(0.005182)
D4RDJIA
0.251695***
(0.005701)
0.206689***
(0.005147)
D5RDJIA
0.199311***
(0.005200)
R-squared
Adjusted R-squared
Akaike info criterion
Schwarz criterion
F-statistic
Prob (F-statistic)
0.776210
0.776075
-6.838981
-6.833774
5784.248
0.000000
0.852723
0.852605
-7.256777
- 7.250266
7238.857
0.000000
0.894064
0.893958
-7.585673
- 7.577859
8437.941
0.000000
0.918150
0.918052
-7.843077
- 7.833959
9342.276
0.000000
No of observations 5007 5006 5005 5004
* stands for a probability that ranges from 0.1 to 1
** stands for a probability that ranges from 0.05 to 0.1
*** stands for a probability that ranges from 0 to 0.05
Table 2. Regression results for S&P500
Variables
Coefficients
Model 1 Model 2 Model 3 Model 4
C
0.000323***
(0.000132)
0.000330***
(0.000106)
0.000328***
(0.000009)
0.000320***
(0.000007)
RS_P500(-1) -1.067676***
(0.0000)
-1.060158***
(0.007830)
-1.042578***
(0.006641)
-1.035558***
(0.005821)
DMR -0.000382
(0.1960)
-0.000426*
(0.000238)
-0.000431**
(0.000202)
-0.000400**
(0.000177)
D2RS_P500 0.499980***
(0.0000)
0.347300***
(0.006157)
0.261366***
(0.005618)
0.200596***
(0.005115)
D3RS_P500
0.329714***
(0.006324)
0.254023***
(0.005618)
0.204871***
(0.005082)
D4RS_P500
0.250420***
(0.005631)
0.206370***
(0.005061)
D5RS_P500
0.198948***
(0.005111)
R-squared
Adjusted R-squared
Akaike info criterion
Schwarz criterion
F-statistic
Prob (F-statistic)
0.778452
0.778319
-6.728703
-6.723496
5859.673
0.000000
0.856469
0.006734
-7.162209
-7.155698
7460.412
0.000000
0.897160
0.897057
-7.495013
-7.487199
8722.096
0.000000
0.921091
0.920997
-7.759297
-7.750180
9721.562
0.000000
No of observations 5007 5006 5005 5004
* stands for a probability that ranges from 0.1 to 1
** stands for a probability that ranges from 0.05 to 0.1
*** stands for a probability that ranges from 0 to 0.05
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Murgea A. (2016).
Mercury retrograde effect in capital markets: truth or illusion?
Timisoara Journal of Economics and Business | ISSN: 2286-0991 | www.tjeb.ro
Year 2016 | Volume 9 | Issue 1 | Pages: 49–61
58
Also, for both indices, there is a statistically significant negative correlation between Mercury
retrograde periods and return’s volatility, inconsistent with the astrological theories.
The interesting fact is that, despite this inconsistency, the traders ‘beliefs in Mercury retrograde
could be the determinant of this reduced volatility. Their tendency to avoid trading in this period
could reverse in fact the market trend predicted by astrological theories (in theory Mercury
retrograde period should be characterized by an increased return volatility, to fit with the
assumptions that in those periods trend reversals or short-term counter-trends in the context of
broader market moves may occur).
4. Final Remarks
The results seem to be inconsistent with the idea of trends reversals from the astrological
theories connected with Mercury retrograde. The regressions coefficients show a negative not
very strong, but statistically significant correlation between the return’s volatility and the dummy
variable in the periods when Mercury seems to go backwards.
Several possible explanations could back up these results. First, as any other anomaly on the
capital market, as long as the market already knows about it there is a strong possibility for it to
be attenuated, to reverse or even to disappear (Schwert, 2003). Mercury retrograde oriented
strategy may in time reverse the process as long as the traders which apply them prevail on the
market. Second, even if there is not such an influence, only the trade absence which often
characterizes the traders in this period could lead to a lower volatility in market returns. In a
new research, Anginer et al. (2015) offer empirical proof that the predictive ability of anomalies
usually survive when the direction of insider trading agrees with the anomaly but completely
disappears in the opposite case.
Another supplementary explanation could be associated with market environment changes as
improved liquidity, increased number and traded volumes of the institutional investors, decreased
trading costs and expanded regulations and information disclosure (Fu & Huang, 2015).
In any case the result of the present study points out that the market does not evolve as the
astrological theories state but the belief in a strong volatility during Mercury retrograde periods
could be in fact one of the important reasons why the market shows a lower volatility in those
periods.
The findings of the present study could be extremely useful both for the capital markets
individual and institutional investors because anomaly-based strategies could be created using
the results. In a market where a lot of participants restrain themselves from trading in Mercury
retrograde period a smart investor could use this trend in his favor.
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DOI: 10.1515/tjeb-2016-0002
Murgea A. (2016).
Mercury retrograde effect in capital markets: truth or illusion?
Timisoara Journal of Economics and Business | ISSN: 2286-0991 | www.tjeb.ro
Year 2016 | Volume 9 | Issue 1 | Pages: 49–61
59
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DOI: 10.1515/tjeb-2016-0002
Murgea A. (2016).
Mercury retrograde effect in capital markets: truth or illusion?
Timisoara Journal of Economics and Business | ISSN: 2286-0991 | www.tjeb.ro
Year 2016 | Volume 9 | Issue 1 | Pages: 49–61
60
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Murgea A. (2016).
Mercury retrograde effect in capital markets: truth or illusion?
Timisoara Journal of Economics and Business | ISSN: 2286-0991 | www.tjeb.ro
Year 2016 | Volume 9 | Issue 1 | Pages: 49–61
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... Why are there Moon phases? Why are there seasons?, etc. Perhaps, one of the reasons that the astrology plays an important role in history is the fact that it tried to answer these questions and additionally the astrology provided a set of tools and techniques for forecasts that human beings always desire (Murgea [17], Kwok [16]). The astrology said that the celestial bodies could affect the mood of people and thereby can predict the behaviours of people by observing the motion of such celestial bodies (Hindustan Times [14], Dombek [7] be explained by psychological principles of decision making (Gärling et al. [12], Alt et al. [1], Floros and Tan [11]). ...
... The recent studies on behavioural finance show the effects of the investor moods on the asset returns. In particular, many studies show the importance of geophysical phenomena, including the Moon phases (Dichev and Janes [6], Yuan et al. [25], Floros and Tan [11], Thach and Diep [24]), and sunspots (Dowling and Lucey [8], Oreste [18]), and Mercury retrograde (Murgea [17]) on the valuation of assets. These evidences showed that the position and motion of the celestial bodies impacted on human mood and biorhythm, leading to deviations in behaviour when making economic and financial decisions. ...
... According to Murgea [17], the period of Mercury retrograde was characterized by confusion and miscommunications. The transactions may be less effective, the individuals tend to make more mistakes, therefore there is a long-standing belief to avoid the preparation of plans, signing contracts, forming partnerships, commencing new projects or performing investment transactions during the Mercury retrograde (Murgea [17]). ...
Chapter
The article analyses the impact of the phenomenon of Mercury retrograde on Vietnam stock market returns. With the data as daily closing price of VN-Index collected by Ho Chi Minh City Stock Exchange (HOSE) for the 2002–2017 period, the authors estimate AR(1)-TGARCH(1,1) model under three different distribution rules: normal distribution, Student’s-t distribution, and Generalized Error Distribution (GED). As a result, AR(1)-TGARCH(1,1) model under Student’s-t distribution rule is the most suitable and there is no any effect found from Mercury retrograde phenomenon in the study result but Monday effect is confirmed to exist in the Vietnam stock market. Also, the volatility of market returns in the future can be predicted by the volatility of the returns in the past and negative shocks that have a significant impact on the volatility of Vietnam stock market returns.
... Several studies have also concentrated on eliciting the various calendar-based anomalies like January effect and Monday effect which are explained by behavioral principles of decision making (Garling et al. 2009;Alt et al. 2011). On similar path, attempts are made to correlate the effect of investors' mood on the asset returns in parallel to explaining the importance of phenomena's like lunar cycle, sunspots and Mercury retrograde period on investor behavior to determine the price movement of assets (Dichev and Janes 2003;Yuan et al. 2006;Dowling et al. 2008;Oreste 2012;Floros and Tan 2013;Murgea 2016;Thach and Diep 2018). Although, the application of astrology to determine stock market movement is a complex process, but many researchers have succeeded to establish the link between the celestial bodies and the stock market movement, market trend and the volatility (Oreste 2012;Bonner and Rajiva 2007;Skinner 2016). ...
... The asymmetric leverage with negative coefficients implies that the negative news impacts the market sentiments to a greater extent to that of the positive news. Although, the findings of this study are contrary to the previous studies analyzing impact of Mercury retrograde movement on different stock indices (Murgea 2016;Thach and Diep 2018), despite this, the study highlights the influence of cultural factors in framing behavioral bias and serves to underscore the importance of the cultural belief and practices of investors in financial decision making process and highlights the behavioral bias in their investment decisions. ...
Article
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Purpose of the study is to analyse the retrograde effect of mercury on Indian stock indices, i.e., Nifty50 and BSE Sensex. This paper presents and probes, whether the usually described phenomenon of the retrogratory effect of planets in Indian astrology persists in Indian stock indices. This research utilizes secondary data retrieved from Bloomberg from 1998 through 2018 of Nifty50 and BSE Sensex on a daily closing basis. Further, the study employs EGARCH (1,1) models to inspect the leverage effect in the market returns and the impact of the retrogratory movement of mercury on market returns. The interdisciplinary studies relating to Indian astrological concepts and financial trading strategy are very scant, wherefore, this study helps to unearth an anomaly-based trading strategy for the individual and institutional investors in the capital market. The study culminates that Indian stock indices observe the presence of asymmetry or the leverage effect during the retrogratory movement of Mercury, and a positive impact of Mercury retrograde movement on market returns. The scope of the study is limited to major stock indices of India and considers only the retrogratory movement of mercury to trace the evidence of behavioral bias in the financial market. This paper furnishes a unique empirical approach to investigate the influence of cultural variable on behavioral bias in Indian stock indices under the influence of the retrograde movement of mercury inciting asymmetric information and market anomaly.
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Multiple regression lag analyses demonstrated that four to five major components of the weather matrix accommodated approximately 30% to 60% of the variance in daily mood scores for 5 male and 5 female university students over either a 2- or 3-mo. period. Between 10% and 30% of this variance was also explained by day-of-the-week for 4 subjects. Optimal values from the weather matrix occurred about three days before mood measures. Two of the most frequent variables were geomagnetic variation and mean barometric pressure. Temperature, which was contaminated by serial correlations, could be substituted by other variables. Standard errors of the estimate for the equations ranged between 8% to 15% of the mean mood measures. However, equations for three of the subjects' predicted scores were significantly correlated with the observed scores for the 10 days and to a lesser extent the 20 days after the period used to generate the equations.
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Many studies show that future stock returns are predictable. These findings are consistent with either mispricing or risk. In this paper, we use a large backward-extended insider trading database from 1975 to 2014 to construct anomaly-specific measures of mispricing that are designed to be unrelated to risk. We find that the predictive ability of anomalies survives when the direction of insider trading agrees with the anomaly, but the predictive ability of the anomalies completely disappears when insider trading disagrees with the anomaly. We conclude that mispricing is an important component of the predictive ability of all thirteen anomalies we consider.
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12 studies are reviewed that have examined the relationships among crisis calls to police stations, poison centers, and crisis intervention centers and the synodic lunar cycle. On the basis of the studies considered it is concluded that no good foundation exists for the belief that lunar phase is related to the frequency of crisis calls. In addition, there is no evidence whatsoever for the contention that calls of a more emotional or "out-of-control" nature occur more often at the full moon.
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The long-run abnormal returns following both stock repurchases and seasoned equity offerings disappear for the events in 2003-2012. The disappearance is associated with the changing market environment: increased institutional investment, decreased trading costs, improved liquidity, and enhanced regulations on corporate governance and information disclosure. In response to the more efficient pricing of stocks, firms become less opportunistic in stock repurchases and offerings. Recent events of stock repurchases and offerings are motivated more by business-operating reasons than to exploit mispricing. Both external market factors and internal firm factors contribute to the disappearance of the postevent abnormal returns. Our findings on the recent events contrast with those of earlier studies and shed light on how the changing market environment affects both asset pricing and corporate behavior.
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Conducted 2 field studies on the relationship of weather variables to helping behavior. In Study 1 (540 adult Ss), which was executed in the spring and summer and subsequently replicated in the winter, the amount of sunshine reaching the earth was found to be a strong predictor of an S's willingness to assist an interviewer. Smaller relationships were also found between helping and temperature, humidity, wind velocity, and lunar phase. Exp II was conducted indoors with 130 dining parties to control for comfort factors. Sunshine, lunar phase, and S's age and sex were found to predict the generosity of the tip left for a restaurant waitress. Sunshine and temperature were also significantly related to the 6 waitresses' self-reports of mood. (35 ref) (PsycINFO Database Record (c) 2006 APA, all rights reserved).
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This paper investigates the role of seasonal affective disorder (SAD) in the seasonal time-variation of stock market returns. SAD is an extensively documented medical condition whereby the shortness of the days in fall and winter leads to depression for many people. Experimental research in psychology and economics indicates that depression, in turn, causes heightened risk aversion. Building on these links between the length of day, depression, and risk aversion, we provide international evidence that stock market returns vary seasonally with the length of the day, a result we call the SAD effect. Using data from numerous stock exchanges and controlling for well-known market seasonals as well as other environmental factors, stock returns are shown to be significantly related to the amount of daylight through the fall and winter. Patterns at different latitudes and in both hemispheres provide compelling evidence of a link between seasonal depression and seasonal variation in stock returns: Higher latitude markets show more pronounced SAD effects and results in the Southern Hemisphere are six months out of phase, as are the seasons. Overall, the economic magnitude of the SAD effect is large.
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A previous report on the effect of the day of the full moon on the acting-out behavior of 20 developmentally delayed, institutionalized women showed that on the day of the full moon there were significantly more misbehaviors than on any other day during the lunar period. The records were re-evaluated to assess the frequency of acting-out behaviors on weekends and holidays as contrasted with the balance of the month. This re-evaluation indicated there was no significant difference between the weekends and holidays and the balance of the month (t = 1.14). The results were taken as support of the previous findings that on the day of the full moon there were significantly more misbehaviors than on any other day of the lunar period.
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This article examines the connection between elements of nature, such as wind velocity, temperature, moon phases, earthquakes and hours of daylight, and the yield of the major index in the Israeli stock exchange. We find that felt earthquakes do not have an affect on yield, while rainy days have a negative affect while wind speed and temperature have a mixed affect.
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The aim of this study was to examine the relationship between the existence of a full moon and the presentation of patients seeking psychiatric assistance from an accident and emergency department. The main hypothesis is that more patients present with psychiatric problems at an accident and emergency department when the moon is full as opposed to the same day of the remaining weeks of the same month when it is not. A case–control design was used. It was concluded that the phase of the full moon is not associated with more referrals of patients with psychiatric problems from an accident and emergency department. No extra members of mental health staff are needed during the days of the full moon as no extra referrals are expected. However, further education of staff as to the effects of the moon on human behaviour is necessary.
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The effect of mood on memory was studied under natural conditions in 2 field quasi-experiments. In both, Ss in happy moods recalled autobiographical memories that were more negative than were memories recalled by subjects in bad moods, a phenomenon termed mood incongruent recall. Three subsequent laboratory experiments are reported that suggest that mood incongruent recall is a reliable phenomenon, occurring when subjects are unaware that their moods are relevant to the experiment. Mood incongruent recall is hypothesized to be related to mood regulation. The implications of these findings for the relation between mood and memory, for mood congruent recall, for laboratory mood inductions, and for self-regulation of mood and depression are discussed. (PsycINFO Database Record (c) 2012 APA, all rights reserved)