Does the Stock Market Suffer From Seasonal Affective Disorder?

Have you heard of season affective disorder (SAD)? It’s a real thing that many people suffer from. In fact, it’s estimated that 6 percent of the U.S. population suffers from SAD.

Typically described as depression associated with the late fall and winter seasons, seasonal affective disorder is thought to be caused by a lack of light. In other words, when the sky turns gray and dark, so does your mood.

So what does this have to do with the stock market? Is it possible that the weather, or at least the seasons could play a role in how investors act? No one knows how many investors actually suffer from this condition. But according to research, most people – which include investors – tend to suffer from SAD during September and October.

Of course, the effects of SAD will fluctuate throughout the year, but according to Dr. Norman Rosenthal, a clinical professor of psychiatry at Georgetown University School of Medicine and author of Winter Blues, for investors who have SAD, it can influence projections that they make depending on the time of year.

When September and October roll around pessimism can set in and that can lead to lower returns. In fact, these months are historically linked to low average returns.

Meantime, optimism in March, which coincides with more daylight, can influence some investors to buy too high. If investors have more risk tolerance they tend to push the envelope, which could lead to more buying than selling.

Lastly, according to report titled, “The Impact of Seasonal Affective Disorder on Financial Analysts,” financial analysts are not as likely to reevaluate their investment positions based on the changing emotions related to SAD.

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