Every August most investors expect a “ghost” to appear and scare everyone away. The ghost in the real sense is the bang on belief that the stock market will turn out bearish in August.
For ardent investors in the Nigerian stock market, the month of August is easily one they can always place a bet on. Every year for the last 5 years, the All Share Index has closed on the negative in the Month of August.
August All Share Index Since 2006
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It doesn’t just stop there! The All Share Index has caved in to the bears, 10 times out of twelve in August of the last 12 years. The market has also posted a negative for 16 years out of the last 33 (since 1985) and 15 times out of the last 20 years. It’s a remarkable streak that we have come to know as the Ghost of August here at Nairametrics. That’s not all! The stock market has not posted a back to back gain in the month of August, since it did so in 2005 and 2006 (4.7% and 18.7% respectively).
What triggers the “ghost”
Analysts opine the reason for the streak of losses recorded in the month of August us due to the summer holidays that results in low investor participation. The theory is that most investors are on holiday in the month of August and as such there are more offers than bids thus triggering lower prices. This year, the stock market lost for the 4 straight trading session for the week as investors sold off to take away some profits.
Some analysts also opine mark downs are also reasons why August always end of bearish for the stock market. As companies earnings in July, most of then choose August to close their register as well as pay for dividends.