Wrong. There is research showing significantly lower market returns on the day following the time shift than on the corresponding day of the week unaffected by the change. There are in fact a number of papers on this particular subject, published over the past quarter century and of course reaching somewhat conflicting conclusions. According to the latest research, the negative impact of the time shift was five to six times the average daily returns. And the conclusion seems to hold on both sides of the equator, as the study encompassed a total of 45 countries. Incidentally, Norway was an exception to the rule: Here, returns were actually slightly higher on the day following the time shift.
How come the stock market can be so fickle?
One might surmise that it’s some kind of seasonal disorder, a stark reminder that winter is at the door. This, however, does not seem to be the case; latitude made no difference (not even for Norwegians). Instead, apparently, it is related to “the temporary loss of investor internal clock harmony.” Our internal clocks are simply messed up for a while. The researchers found a similar effect in spring, when changing to daylight saving time also produced a loss.
Another paper found a delayed price response to earnings news released during the first week after changing to daylight saving time in spring. Evidently, the sweet anticipation of summer was lost on confused investors who had their sleep cycle interrupted. Sleep disruption (as in jet lag) has been shown to make people more aware of bad news, but in this case, good news or bad news made no difference.
The effect was stronger for companies with, and I quote, “less sophisticated investors”, meaning retail investors, and companies with more frequent changes in institutional ownership. Either way, we are a long stretch away from the truly efficient stock market populated by strictly rational investors.
But that’s no real surprise, is it?
