Saturday, April 7, 2012

The Moon And The Stock Market

Have you heard before that human tends to be emotional during the full moon? The reason why I want to talk about this is because statistically shown that mankind behaves irrationally during these periods and this will affect our decision making process in the financial markets.

A study suggests that a full moon really can bring out the beast in us, turning us into irritable animals.

While we may not actually transform into the bloodthirsty creatures of fables and movies such as An American Werewolf In London, research suggests we do display worrying symptoms.

A study conducted in Australia found that in 2009, 91 emergency patients with violent, acute disturbances were happening in one hospital north of Sydney.

According to the research, "some of these patients attacked the staff like animals, biting, spitting and scratching, and the patients had to be sedated and physically restrained to protect themselves."

Of course we can do another research on the crime rate and the full moon to confirm the above claims. But today I have done a small research on this topic and compare to our Malaysia KLCI and to see whether the moon does affect our stock market.

This research is about the distance of the moon to the earth and how this relationship affect our stock market. It is generally believed that people are more rational when the moon is furthest away from the earth, and the name for this type of moon is called "Apogee Moon". Another extreme case is when the moon is closest to the earth and we can see the moon big and round right infront of us, this type of moon is known as "Perigee Moon". It is this perigee moon that often cause people become emotional, anxious, and pessimistic.

So I did a research on the dates of the perigee moon and marked them on the KLCI chart. (The chart may be unclear but if you click the picture, it will be enlarged.)

Amazingly I discovered that the claim is about 86% accurate that the KLCI did experience local low during the investigating period.

On the other hand, there's a research done by, they studied not only the perigee moon, but also the apogee moon (when the moon is furthest away from the earth). They discovered a high correlation between the "highs" and "lows" with the agogee and perigee moon. Most of the time, "highs" happen during apogee and "lows" happen during perigee! In other words, it means that "highs" happen when people are more rational while "lows" happen when people are emotional.

I hope this article is not trying to convince you that astrology is perfect, but just to highlight to you that these little researches help us to look at the stock market in different perspectives.

Happy investing,

Pauline Yong


sharetipsinfo said...
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Longines said...

Our KLCI is very much depends on external and internal situation. I wouldn't say that is a recession but rather a slow down or consolidation. As a trader, we have to react according to market flow not to predict it.

darren said...

hi, where can i buy your book? I Love Stock.