Mark Twain effect
What is the Mark Twain effect?
The Mark Twain effect refers to the pattern of stock returns being lower in October compared to the rest of the year. The term comes from a line in Mark Twain's novel, Pudd'nhead Wilson.
Where have you heard about the Mark Twain effect?
Ever had a bad month's trading in October? If you've read Pudd'nhead Wilson, you'll know the quote: “October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February."
What you need to know about the Mark Twain effect.
Twain's comment on the state of the stock market might have been sarcastic, but it seems there's a ring of truth to it. Plenty of past market cycles have seen a dip in stock returns in October. Since 1928, there's been more than 35 years of poorly-performing Octobers.
Because there's little statistical backing for the Mark Twain effect, it's seen as a psychological expectation more than anything else. However, the 1929, 1987 and 2008 stock market crashes all occurred in October - so you'll have to make up your own mind.
Find out more about the Mark Twain effect.
It seems October is a bad month for trading. The October effect refers to the extraordinary number of market crashes that have historically occurred in October. Read our guide here.