July unlucky month for securities investors

Tuesday, May 13, 2008
July proves to be an unlucky month for securities investors, according to Ho Quoc Tuan and Phung Duc Nam at HCM City Economics University.

Analyses of the periods of the stock market in other countries in the world show that there exist months that prove to be unlucky for securities investors.

In the US, people say “Sell in May and go away”, in reference to the so-called ‘Halloween effect’. The stock purchases in the period from November to April always bring higher profit than the purchases in the period from May to October.

It is quite a surprise that the thing is true not only in the US, but in other countries, where Halloween is not a tradition, like in Japan or Australia.

In the US, profitability is often the highest in January, which is explained by the fact that investors sell stocks in December, when the fiscal year ends, and purchase stocks in January. However, the ‘January effect’ exists in other countries where the fiscal year does not end in December.

And so, it has been asked if the effect exists in Viet Nam.

It seems that the ‘Halloween effect’ exists in Viet Nam as well. Statistics show that profitability from May to October is always low compared to profitability from November to April.

The most interesting thing from our discovery is that the profitability is very high in January and November, while the profitability in July is very low. The ‘January effect’ also exists in Vietnam as the profitability in this month proves to be the highest. Even when the stock market falls like this year, and the profitability is negative, the profit in January 2008 was less negative than February and March.

We have also found out that July is the month when the profitability is always the lowest. No July has seen positive profitability since Viet Nam’s stock market began operating. And the ‘July effect’ is not seen in any other stock market.

To explain the ‘Halloween effect’, people say that investors always go on summer vacation in May; therefore, the market liquidity is always low in this month and there are few transactions.

No convincing answer has been found to explain the ‘July effect’ in Viet Nam, though.

Is it because companies all pay dividends in July and issue new shares in July? We don’t have enough materials and data about the share issuances that took place in the past.

However, experts say that companies do not issue shares or pay dividends only in July. Hmm… (TBKTSG)