Celebratory influences on investment decisions: A long-horizon test of market efficiency

The primary purpose of this research is related to celebrated days in the United States and the possible impact such celebrations have on investment decisions and returns. This study seeks to further investigate the field of behavioral finance by providing support for a hypothesis that suggests common days of celebration impact security price returns in U.S. markets. The common days of celebration investigated are the Super Bowl, Valentine's Day, Ash Wednesday, St. Patrick's Day, Mother's Day, Father's Day, Rosh Hashanah, Yom Kippur and Halloween. This study uses event study methodology to examine the existence of a link between an affect heuristic from the field of psychology influencing investor decisions and market returns. Prior research has concluded anomalies have existed for trading days prior to holidays when security markets in the United States closed. This research provides an extension by reviewing returns on U.S. stock exchanges for days prior to, days of and days after common celebrations. The study examines returns when markets remain open yet sizeable celebrations may impact investor decisions.;The research results indicate that there is no significant return difference in NYSE, AMEX or NASDAQ value weighted portfolios or NYSE or NASDAQ equal weighted portfolios, yet there is a significant return difference between the day before a celebration and the day after a celebration for an AMEX equal weighted portfolio. The results conclude there is no difference in returns around celebrations between the NYSE, AMEX and NASDAQ markets. The analysis indicates the day of the week around celebrations impacts market returns significantly. In addition, the investigation shows differences in returns when the day before a celebration, a celebration day and the day following the celebration occur on three sequential trading days compared to such days that do not occur on sequentially. A model for predicting positive or negative returns finds the day of the week is the primary independent variable showing significance in all three securities markets. Last, a regression model for predicting return values based on macroeconomic variables and celebration variables shows primary significance for all markets for macroeconomic variables and the day of the week.