Christmas – A Look At Popular Economic Myths

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Christmas Economics – A Sleigh Ride

Laura Birg

University of Goettingen (Gottingen)

Anna Goeddeke

Reutlingen University – ESB Business School


Do you believe that at Christmas time the gas prices, the economy and the number of suicides peak? Do you think that the value of presents you are giving to your beloved is of importance? We show in this paper that conventional wisdom about Christmas is often doubtful. Furthermore, we give an idea of how Santa Claus — and maybe you — is able to finance Christmas celebrations, why emergency departments are a place to especially avoid during this time of the year and why Christmas tree growers might care to explain the differences across species to you this year. We cannot clearly establish whether Christmas entails a welfare loss or gain, however, we give you an idea as to which institutional settings might reduce a potential welfare loss. Also, we give advice about which behaviors might get you more Christmas presents from Santa this year. Finally, we find that more research is needed to give conclusive reasons why Santa Claus actually brings presents to (nearly) everyone.

Christmas Economics – A Sleigh Ride: Introduction

Santa Claus is now back at the frosty North Pole. After enjoying the Caribbean sun all summer long, he is now planning the Christmas celebration ahead. To do so, he is surrounded by his Christmas Economic Advisors (CEA) ? Dasher and Dancer and Prancer and Vixen, Comet and Cupid ? and Donner and Blitzen together with the chairman Rudolph ? who are assisting and advising him in the preparation of the Christmas Economic Report. In this report Santa ? a benevolent dictator aiming to bring love and joy to everyone celebrating Christmas sets outs the planning for the next holiday season. Santa is furthermore supported by a team of elves, mainly in charge of the logistics, marketing, accounting and financing of the presents.

I whish it could be Christmas Every Day – Stock Markets before Christmas

After some troublesome years of increasing demand for presents, Santa’s finances are tight. He is not sure how to finance the next Christmas season. Thus, Santa consults the  CEA. Rudolph has clear-cut advice. The capital should be invested in stocks right before Christmas because economists found a pre-holiday effect in countries celebrating Christmas. This is characterized by abnormal returns on the day(s) preceding Christmas. Investing all liquid assets in stocks will solve Santa’s financial problems within days. Even more surprising, the economic literature is not even very controversial about it. The occurrence of this effect is wide spread and persistent.

?But this cannot be true, Blitzen replies, it contradicts Fama’s (1970) Efficient Market Hypothesis. If it is as simple as you say, this knowledge should be sufficient for all rational investors exploiting this effect, so that it disappears. And Jagannathan et al. (2012) show that investors are more likely to make their investment choices at the end of the year. Therefore, abnormal returns on special and predetermined occasions such as Christmas cannot exist.

Rudolph is not convinced by Blitzen’s objections and refers to the paper of Lakon- ishok and Smidt (1988). ?As early as 1988, they found that pre-holiday returns are 23 times higher than those on other days for the US besides Ariel (1990) found 10 times higher returns compared to the rest of the year. Even more, several empirical studies report that returns preceding religious holidays tend to be superior to returns of other holidays (see Cao et al. 2009 and Bley and Saad 2010). And this pre-holiday effect has not only been established in the US in several studies, but also in several other markets. Blitzen continued: The reasons for this effect are more controversial and several hypothesis have been tested and lots of them rejected. However, a simple and nevertheless convincing argument is put forward by Marrett and Worthington (2009). They explain the effect with investors’ psychology. Before Christmas, investors are more euphoric, optimistic, and in a positive mood and buy more stocks. Furthermore, according to the findings of Bley and Saad (2010) holiday effects are obviously driven by investor cultural backgrounds and religious beliefs. Thus, the positive Christmas effect is mostly found in Christian countries.

See full PDF here.

Christmas - A Look At Popular Economic Myths

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