Since ancient times entire civilizations have associated the lunar phases with specifichuman behaviors. Extensive research has been conducted over the years to see if there are anysignificant changes in human behavior during specific lunar phases. As written by Paracelsus inthe 16
th
century “mania has the following
symptoms: frantic behaviour, unreasonableness,constant restlessness
and mischievousness. Some patients suffer from it depending
on the phasesof the moon” (1). More recently Lieber and Sherin reported homicides over 15 years in from1956-1970 given the lunar phase, and found it to be statistically significant peaking at times of afull moon and a secondary peak at periods just after the new moon phase (2). If the lunar phasesdo affect human behavior, can it be said that they also affect the United States financial markets?If investors do react based on the lunar phases, it would be a complete violation of the EfficientMarket Hypothesis, which states that all financial instruments reflect perfect information whenbeing bought and sold.This study has been performed based on a psychological hypothesis. A similar study wasconducted in 1985 by Ivan Kelly and James Rotton, investigating a relationship between themoon phases the Dow Jones Industrial Average, but nothing was proved to be significant. Thegoal of this research is aimed at finding any significant correlation between the U.S. financialmarkets, using data from five major indices and the ten year bond, and the moon phases, usingdata from four lunar phases.Data from the United States Naval Observatory website was obtained. The data includesinformation on four moon phases which are: new moon, first quarter, full moon, and last quarter.This data also included information on total lunar eclipses, and total solar eclipses. Data wasobtained for 21 years from years 1988-2008. Data from Merrill Lynch was also obtained. Thedata includes information for the 10 year Treasury bond note, and five major U.S. stock indiceswhich are: Dow Jones Industrial Average, NASDAQ, New York Stock Exchange, Russell 2000,and S&P 500, for the same 21 year period. The data was organized in a spreadsheet for eachindex. In the first column was the date, in the next column was the index closing pricecorresponding to each date, and in the next six columns were: new moon, first quarter, full moon,last quarter, total solar eclipse, and total lunar eclipse, respectively. The moon data was filled inthe spreadsheet where a one indicated an occurrence for each specific lunar event, and a zeroindicated no occurrence, corresponding to each date. Similar research papers include a timewindow, where as many as 2-7 days before and after the moon phase occurrence are marked.Note that research conducted for this study only included the date of the lunar occurrence.Four dummy variables were created for the regression, to indicate an occurrence of aspecific lunar event. The dummy variables are:,,, and. The econometric model usedfor the regression was
1
d d
2
d
3
d d
4
d
t t t
yd d d y
ε β β β β β β
+++++++=
−
12121110
2
d
4
d
4433
where= index closing price,= 1 if new moon event, = 0 otherwise, = 1 if full moon event, 0 otherwise, = 1 if totalsolar eclipse event, = 0 otherwise,= 1 if total lunar eclipse event, = 0 otherwise, and=index closing price in the previous period.
t
y
1
d
3
d
1
−
t
y
Six regressions from Stata were performed; five of which were U.S. financial indices, andone for the 10 year Treasury bond note. For the S&P 500 index there was a significantrelationship between the close price and the occurrence of a new moon phase. The table below isthe Stata regression.
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