An expensive change

Putting the clocks forward isn’t just “totalitarianism at its most intrusive.” It’s also expensive. Lisa Kramer has estimated (in this pdf) that the UK stock market falls by an average of 0.4 per cent on days after the clocks go forward. If this pattern continues on Tuesday, investors will lose £6.2 billion. And we won’t get the money back when the clocks go back in the autumn. Ms Kramer has estimated that the market also falls after that happens.

The reason for this, she says, is that changes in sleep patterns can make people nervous and prone to errors in judgment.

Will this trend continue? Obviously, I’m not going to call the market – I look stupid enough as it is, without getting into that silly business.

There are, though, two other influences affecting the market on Tuesday. One is the long weekend effect. Vijay Singal has estimated that after long weekends, the usual tendency for the market to fall on a Monday is absent – and, indeed, even this tendency has been insignificant since 1990.

On the other hand, some researchers have found that US returns on Fridays and Mondays (but not other days) are positively serially correlated, with bad Fridays leading to bad Mondays, and vice versa. If that pattern holds over long weekends, Thursday’s small dip in the US could have knock-on effects for the Footsie.

This is of course wonderfully inconclusive for the unimportant issue of what happens to the market on Tuesday. But it does bear upon the question of what causes share prices to move.

If you were daft enough to believe journalists, you’d think these reacted systematically to “news.” They don't. They respond to changes in investors’ perceptions of risk. And these can be moved by some very strange things indeed.

Comments

[Andrew McGuinness]

I looked at the cost of daylight saving time from another angle: http://anomalyuk.blogspot.com/2005/03/its-1315.html