Behavioural Finance Group Project The Lunar Phase And Stock Returns.pdf

Empirical research conducted by [ CITATION Yua0l \l 1066 ] studied the link between lunar phases and stock market income in 48 countries throughout the world and discovered that stock re

VIETNAM NATIONAL UNIVERSITY HCMC

INTERNATIONAL UNIVERSITY

BEHAVIOURAL FINANCE

LECTURER: Vu Thuy Mai Uyen

GROUP PROJECT: The lunar phase and stock returns

Nguyén Huong Giang-BAFNIU18264

Tran Thi Thanh Mai-BAFNIU18241

Tran Vii Ngoc Anh-BAFNIU 18265

Nguyễn Hoàng Hải Phương-BAFNIU18240

Lê Nguyễn Thanh Tuyền - BAFNIU18267

Contents

TH, Methodology L1 1 2v 91 2191111011111 111111101111 1 HH1 HH Hà hy 3

1 Research questIOn L1 1 121 v1 1 111011 1111151 0110111111 HH kg KH 1X kg 4

PM Co Ặ 4

IV — Data statIstICS ÍOT Š V€ATS LH nH HH H1 n1 1111101111111 1 111 11118111 11 181k cà 5

V The correlation analysis and test of signIficanee - s:cccccc ng ng 2121 reo 7

lv on (aaaA ¬aáááăăẽẽ 7

PA on on = 8

VI Summary ofthe cumulative deseriptive statistics and the differences: 9

1 Cumulative descrIptIve sfatISEICS: n1 TH n1 01111111511 11H HH Hiện 9 PM na 10

a The relationship between mean return of full moon and mean return of new moon: 10

b The cumulative mean return of full moon and new IOOHI à cành nise 10 MiMME o nh 10 0) A4 on 11

I Introduction

People have sensed and believed in the influence and importance of the moon on the Earth and the planet's environment since prehistoric times The moon's effect on Earth is mostly evident in the ebb and flow of tides, planetary tilt, and evolutionary history, including human history on the planet Several theories have recently been dismissed as "superstitious," claiming that the Moon has extraordinary impacts on people's bodies, behavior, and minds Scientists, sociologists, and policymakers have uncovered and validated this As a result, it is acceptable to assert that the Moon influences financial decisions and stock prices This is a relatively new topic that has received little attention in Vietnam There are no inferences to be drawn on the link between the moon phase and stock market results As a result, this greatly drives us to analyze the literature on how moon phases impact human mood and behavior

II Literature review

Many previous studies and articles have addressed how moon cycles may impact human behavior and stock market performance Empirical research conducted by [ CITATION Yua0l \l 1066 ] studied the link between lunar phases and stock market income in 48 countries throughout the world and discovered that stock returns increased at the start of a new moon season compared to the period of the full moon season As a consequence, it indicates that stock returns during the full moon cycle would be lower than those during the new moon cycle, which are comparable to [ CITATION Dic011 \l 1066 ] found that higher stock returns 15 days around new moon dates compared to 15 days around full moon dates Finally, the analyzed empirical evidence suggests that the moon cycle influences psychological well-being and that behavioral finance theory is intimately related to stock markets or specific investors’ behavior

Ill Methodology

The moon phase data is extracted from the audio and converted to a calendar for the convenience of the collecting slip From 2015 to 2019, we classified the lunar phases into two categories: New Moon and Full Moon A descriptive model is a scientific technique that empirical observation and a description of the behavior of the subjects without the effect of another objective (Research Methods, Design, and Analysis, 12e, Christensen, Johnson & Turner, 2011) To investigate the effects of Moon cycles on investors, we gather daily closing

bids from the market for 30 listed businesses from diverse sectors of the Vietnamese

economy

From 2015 until 2019, the VN30 supply will be depleted Collecting data daily basis allows

us to compare investing behavior on the full moon, new moon, and normal days

1 Research question

Do the lunar effect change stock returns?

How is the relationship between lunar phases and stock market return?

2 Methodology

1

n=— n

Ỉ 1 Y

X1: days from FM X2: from NM to X3: from FL to NM Xn

to NM FM

Xi, X2, Xs, ., X: is also know period include normal days

We use three steps to analyze the relationship between the lunar phases and stock

returns

a Step 1:

The percentage change of the daily closing price determines the stock price movement during the new and full moon phases of the lunar cycle The change in density was calculated according to the following formula:

PạT Pa ¡

Pia

Where: R returns at time t

P,: the close price of day n on new/full moon period

P,.1: the colse prece of day n-1 on new/full moon period

b Step 2:

Calculate the stock returns of the normal days during the new and full moon phases We define dates, not as new/full moons, as normal days around the new and full moon of the phases The mean values are calculated by following this model:

BX

Where 7r : the mean returns of normal days

n ; number of days have already traded

X, : the return per day of normal days

c Step 3:

This step involves determining the standard deviation to investigate the volatility

of investors trading on stock exchanges during the moon phases This equation is below:

SD=( Ty, lX,—nŸ

Where 7: the mean returns for new/full moon phases

IV Data statistics for 5 years

This data uses descriptive statistics to show the relationship between the lunar phases and stock returns Table 3.1 to table 3.5 summarizes descriptive statistics, including minimum, maximum, mean, and standard deviation of stock returns on full moon and new moon periods

Table 3.1: Descriptive Statistics 2015

2015 N Minimum Maximum Mean Std Deviation

FM 11 -.028 .016 -.0038182 .0111743

The result in 2015 shows that on the new moon period, the mean stock return was recorded -0.26222% with a maximum of 0.9% and a minimum of -1.6% Adversely, the mean

of the full moon period was lower by -0.38182% with a maximum level is 1.6% and a minimum level is -2.8% Regarding standard deviation, the full moon period was higher than the new moon period, 1.11743% and 0.73426% respectively

Based on the table above, the study finds that stock returns are negative in the full moon period, although the volatility of full moon is higher than new moon

Table 3.2: Descriptive Statistics 2016

2016 N Minimum Maximum | Mean Std Deviation

FM 8 -.0138 .021 .0037625 0126358

In 2016, the mean stock return of full moon was 0.37625% higher than the reported normal tranding days, a maximum and a minimum are 2.1% and -1.38%, respectively In the

new moon period, the mean return is -0,15625%, the minimum at -0.93% and the maximum

at 1.1%, The standard deviation of the new moon is lower than of full moon (0.74632% and 1.26358%)

Based on the results, the study finds that both stock returns and standard deviation in the full moon period are higher than the new moon

Table 3.3 Descriptive Statistics 2017

2017 N Mean Std Deviation | Minimum Maximum

NM 7 0021429 0118687 -.0075 02

FM 7 -.0001 0031204 -.0061 003

The table above illustrates that the performance of stock return in the new moon period is better than the normal trading days with a mean of 0.21429%, a maximum of 2%, and a minimum of -0.75% In terms of full moon, the standard deviation was 1.18687%, which was lower volatility in an investment of investors compared to the new moon period, followed by 0.31204% The full moon period had the minimum at -0.61% and the maximum at 0.3% Based on the results, the study finds that both the full moon’s stock returns and the volatility are lower than that of new moon period

lable 3.4: Descriptive Statistics 2018

2018 N Mean Std Deviation Minimum Maximum

NM 9 -.0029333 0133891 -.0299 017

FM 8 .00105 .0154742 -.0148 0

The minimum of both new moon and full moon is negative, -2.99% and -1.48% respectively, and the maximum of full moon equal to zero The mean stock return of the full moon period was 0.105%, higher than that of the new moon period (-0.29333%) The new moon’s standard deviation recorded 1.33891%, is lower than the full moon period (1.54742%) It is similar that the number of investors who will invest in the full moon period

is higher than the new moon in 2018

Table 3.5: Descriptive Statistics 2019

2019 N Mean Std Deviation Minimum Maximum

NM 9 -.0009222 0055877 -.0139 004

FM 10 .0014 .0092078 -.0176 O11

The 2019 results show that the mean of stock return was -0.09222% lower during the new moon period than (normal trading days) Minimum and Maximum return of new moon period were -1.39% and 0.4% respectively About the full moon period, the minimum return was

-1.76%, and the maximum was 1.1% The volatility of the full moon period was 0.92078%, indicating higher than that of the new moon period, which was 0.55877%

Based on the results, the study finds that both the new moon’s stock returns and the volatility are lower than that of full moon period

Vv The correlation analysis and test of significance

1 Correlation analysis

The association between returns in new moon phases and returns during full moon periods was investigated using correlation analysis This study figures out whether the investment decisions were affected by the new and full moon periods

lable 4.6 displays the outcome

pwcorr MeanNM MeanFM, sig

MeanNM Mean FM

MeanNM 1.0000

MeanFM 0.1003 1.0000

0.8725

Table 4.6 shows that there is a positive relationship correlation between the mean returns of 0.1003 for 5 years It means that both the mean return during the new moon and the mean return during the full moon phase increase or decrease together However, the sig level (2- tailed) is larger than 0.05 and nearly 1 (0.8725) Therefore, it is not significant to conclude that returns in new moon related to returns in full moon and vice versa In other words, the mean return during the new moon and full moon are independent Figure 1 shows the result

below

Figure 1: Cummulative Mean Return

0.500%

0.400%

0.300%

0.200%

0.100%

0.000%

-0.1 oof?

-0.200%

-0.300%

-0.400%

-0.500%

—@— MeanNM —@— Mean FM

2 Test of significance

The Paired Sample t-test aims to figure whether there is statistical evidence that the mean difference between paired observations is significantly different from zero In particular, at 95% confident interval, the change between returns in the new moon/ full moon phases and returns in a normal day are shown in Table 4.7.1 and Table 4.7.2 below:

Table 4.7.1:

Paired t test

Table 4.7.2:

Paired t test

In table 4.7./, during the new moon phases, the t-test was finding at -2.7484; then p-value = 0.0515, higher than 0.05 The p-value proves a significant difference between returns during new moon phases and normal trading days

Likewise, table 4.7.2 reveals that the t-statistic equals 0.0244 Besides, the p-value = 0.982, higher than 0.05 Therefore, it has a piece of evidence to conclude that the returns on full moon differ significantly from returns on normal trading day

VI

differences:

Summary of the cumulative

1 Cumulative descriptive statistics:

lable 4.8: Cumulative Descriptive Statistics

descriptive statistics and the

N Minimum Maximum Sum Mean Std

Deviation Mean return FM | 5 -0.0038182 | 0.0037625 0.0022943 | 0.0004589 | 0.0027729 Mean return NM | 5 -0.0029333 | 0.0021429 -0.0058973 | -0.0011795 | 0.0020254

The cumulative descriptive statistics (table 4.8) indicated that both the mean of stock return and the standard deviation in the full moon period is higher than the mean of stock return in the new moon period (0.046% > -0.118%) and (0.277% >0.203%) This brings the result is that the full moon period had higher returns and high trading volatility On the contrary, the new moon period had a lower return leads to people decided to invest is lower

The study also discovers that the mean of stock return of full moon increase or decrease does not affect new moon and vice versa since the cumulative return of full moon and new moon are independent is mentioned above

Finally, in the test of significance, the study shows that a significant difference between the mean stock return of full moon and new moon periods to the mean return of the normal days since the p-value of them are lower than the t-critical at the degree of freedom of 4 tested under 95% Confidence level

2 The differences:

In comparison with the based report (except for the difference between the two markets), the study has two significant differences:

a The relationship between Mean return of full moon and Mean return of new moon:

As mentioned above, the cumulative return of full moon and new moon are independent On the other hand, the based report asserts that the mean return of full moon and new moon has a negative correlation, which means when the cumulative return on new moon increases, the cumulative mean returns on full moon decrease

b The cumulative mean return of full moon and new moon:

In the based report (4.2 Panel Analysis), the mean return of new moon (3.95bps and 5.93 bps)

is higher than full moon for the 15-day and 7-day respectively However, the result in our

study is the opposite, with a mean return of new moon less than full moon (0.046% > -0.118%)

VII Limitations:

All the data analyzed in this study explain the effect of satellite results (full moon, new moon, normal days) on stock market returns as well as the behavior of investors However, there are still remarkable limitations in this research conducted There are indeed other potentially strong and unusual effects that are not considered in this study, such as the day of the week effect, the calendar month effect, and the holiday effect

On the other hand, this study is only closing the price of the VN30 in 15 days around full moon and 15 days around new moon for five years There are some regular trading days not included in the statistics because it is generally known that there are some special holidays related to the Moon Calendar in Vietnam Therefore, no trading occurs in the next 3-5 days like Lunar Tet Holiday which is the most important celebration in Vietnamese culture

In addition, since all the data was collected from the Vietnam stock market, it can not illustrate the perspectives of other countries Another limitation is that Vietnam is in Asia and has a different calendar from other Western and Eastern countries, thus this study just describes the facts and the reality in Asia Henceforth, the results might not whether there is the same influence of the Moon period on market participants’ decisions around the world VIII Conclusion:

Scientists have indicated that moon phases could cause intense mood swings, especially the full moon It directly affects emotion and mood - which makes people’s feelings whether good or bad is more intense than usual Furthermore, behavioral finance suggests that investors might be emotionally biased The study's findings on the relationship between lunar cycle and stock return in companies listed at VN30 Index

In summary, lunar cycle significantly influenced the returns on the stock The initial conclusion was that full moon and new moon affect the stock return The understudy found that stock returns were marginally higher on the days around the full moon date than the days around the new moon phase of the lunar cycle The other conclusion is that full moon and new moon are not related to each other due to the above statistical results This report points out that the moon cycle positively affects the decisions of investors and results in a rise in stock returns, particularly around the new moon and full moon phases compared to the lunar

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