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Santa Claus rally

The tendency for the last five trading days of December and the first two of January to show positive average returns.

The window is narrow and specific, which is itself a warning sign: a pattern defined by exactly seven sessions has the flavour of something found by searching rather than predicted in advance.

Suggested causes include light holiday volume, year-end bonus investment, tax-related positioning and general optimism. All are plausible and none is demonstrated.

Some analysts treat the absence of the rally as a bearish omen for the following year, which stretches a small sample very far. With roughly one observation per year, even a century of data gives a modest number of trials, so confidence intervals around any claim are wide.

Related: seasonality, january-effect, turn-of-the-month-effect, sample-size, sell-in-may

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